Home Builders See Strong May Sales, But Not Without Problems

June 24, 2020
Two home builders looking at a house mid-construction
By Andy Dean

The numbers for newly built home sales are climbing at a faster rate than expected, according to CNBC. A seemingly strong comeback after the pandemic held builders back, but there are bigger issues restraining builders from meeting the demand for housing starts. Labor and land constraints paired with the struggle to find skilled workers and the prices of materials, such as lumber, make it that much more difficult to meet the new demand. After adding over 200,000 workers in May, home builders still did not see such a rapid demand recovery in their immediate futures.

Sales of newly built homes jumped far more than expected, up nearly 13% annually, according to the U.S. Census.

After slowing dramatically in March, as the coronavirus shut down the economy, they posted the strongest May pace since 2007, a recovery that surprised even the builders themselves. But housing starts were not nearly as strong, and builders are struggling to meet this new demand.

A telling point in the data: The biggest sales jump came in homes not yet started. That caused the supply of homes for sale that were under construction to drop 15% compared with a year ago.

“Sales of homes not yet under construction are rising given capacity limitations in the building industry,” said Robert Dietz, chief economist at the National Association of Home Builders. “Due to labor and land constraints, homebuilders were already producing too few single-family homes given potential demand. As housing demand has picked up in recent weeks, builders have shifted sales to homes not yet under construction – a 20% year-over-year gain for such sales.”

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