For the first time in their company’s history, some home builders are unable to sell homes, turning away buyers. Labor shortages, record high building material prices, order backlogs, and limited lot supply are restricting builders from constructing homes. Many have sold more homes than they can build and ongoing issues restrain builders from increasing construction quick enough to meet intense demand. Increasing home prices are one result of this. D.R. Horton’s CEO said it’s been an unfamiliar experience having to turn away buyers, and the company’s net sales orders dropped 17% in the most recent quarter compared to one year ago, reports the Wall Street Journal.
“We’re all managing through a market that none of us have ever seen,” Mr. Auld said.
Home builders restricting the number of homes they sell is helping to further fuel new home prices at a time when the median existing-home price has climbed to a record high of $363,300.
The median price of a newly-built home rose in June to $361,800, up 6.1% from a year earlier, according to the Commerce Department.
While that increase isn’t especially high, given the booming demand and limited supply, some publicly traded builders are reporting much larger price jumps. Taylor Morrison Home Corp. said its average sales price for homes sales that closed in the second quarter rose 9.8% from a year earlier. The average price for new orders in the same quarter climbed 31.8%.
Meritage Homes Corp. reported a 4% annual increase in average sales price for second-quarter home closings and an 18% increase for new orders.
“Because builders are intentionally not selling, it’s creating a lot of pricing power,” said Alan Ratner, managing director at real-estate research and advisory firm Zelman & Associates.
Recent housing data reflects the discrepancy between building and selling in the new home market. Housing starts, a measure of U.S. home-building activity, climbed 29% in June from a year earlier, according to the Commerce Department. But sales of newly-built homes slid 19% in the same time frame.