The most recent data from the U.S. Census Bureau shows an unexpected fall in new-home sales, dropping 6.6% from May and 19.4% below June 2020 levels. Sales for newly built homes reached an annualized rate of 676,000 in June 2021 but were at 839,000 in June 2020. Analysts predicted a new-home sales increase of 3.4% for June, but price hikes may be putting new homes out of reach for many buyers, says CNBC. The median price for a new home increased 6% from June 2020 to June 2021. CNBC notes most of the homebuying now is happening on the higher end of the market, leaving builders unable to construct affordable homes due to construction prices.
Softwood lumber, in particular, spiked more than 300% during the pandemic, and while it has fallen back dramatically in the last month, it is still about 75% above its 2019 average. Other lumber products are still significantly more expensive.
“We also know there are shortages of appliances, labor and affordable lots,” noted Peter Boockvar, chief investment officer at the Bleakley Advisory Group. “The moderation in home sales is likely a combination of sticker shock and the slowdown in the ability of builders to finish homes because of a variety of delays.”
The inventory of new homes for sale jumped from a 5.5-month supply in May to a 6.3-month supply in June. Last fall, it sat at a low of just 3.5 months. In June, the number of homes for sale that had not yet been started hit an all-time high.
“Annual comparisons will get even more difficult in coming months, as it was this time last year that the market began to surge and reach highs not seen since before the Great Recession,” wrote Zillow economist Matthew Speakman in a release.
Buyers in June were also hit with higher mortgage rates, which spiked about a quarter of a percentage point during the month. While that may not sound like a lot, if buyers are already stretched by higher home prices, they have less of a financial cushion to absorb higher mortgage rates.