Sales of newly built single-family homes dropped 5.9% in April compared to March, the U.S. Department of Housing and Urban Development and the U.S. Census Bureau reported on Tuesday. Sales are dropping, and builders are blaming affordability as the main culprit for why.
New-home sales prices have jumped 20% compared to a year ago.
“Affordability factors are clearly affecting new-home sales,” said Chuck Fowke, chairman of the National Association of Home Builders. “A growing number of builders are limiting sales in order to manage supply chains, including access and cost factors associated with lumber, appliances, and other building materials. Policymakers need to find ways to improve the supply chain, by facilitating more domestic production, or in cases where that cannot be done, suspending tariffs to allow for more imports.”
Lumber prices have jumped more than 300% since April 2020. Other material costs—such as for steel, concrete, and gypsum—are also climbing at a record pace.
These higher prices are being passed along to home shoppers. In May, builders reported that higher lumber prices alone were adding about $36,000 to the price of an average new single-family home. Forty-seven percent of builders recently surveyed report adding escalation clauses into their contracts to try to recoup higher material costs as they build the home for buyers too.
“Higher prices have priced out buyers, particularly at the lower end of the market,” says Robert Dietz, the NAHB’s chief economist.
A year ago, 45% of new-home sales were priced below $300,000. Only 27% of new-home sales were priced below $300,000 in April, Dietz notes.
The median price for a new home was $327,400 in April, up from a median sales price of $310,100 a year earlier.
Inventory remains low at a 4.4-month supply. The supply of new single-family homes is 33% lower than a year ago.