Growing Housing Affordability Issues Continue
The U.S. Department of Housing and Urban Development along with the U.S. Census Bureau are reporting this week that rising building materials costs and low inventory have caused new home sales prices to jump 20 percent on a year-over-year basis, harming housing affordability and driving down the pace of new home sales. Sales of newly built, single-family homes fell 5.9 percent following a significant downward revision of the March estimate, to an 863,000 seasonally adjusted annual rate.
"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."
"After a period of builders holding back price increases, new home prices were 20 percent higher year-over-year per the April Census data," said NAHB Chief Economist Robert Dietz. "Higher costs have priced out buyers, particularly at the lower end of the market. A year ago, 45 percent of new home sales were priced below $300,000. In April 2021, only 27 percent of new home sales were priced below $300,000."
A new home sale occurs when a sales contract is signed or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the April reading of 863,000 units is the number of homes that would sell if this pace continued for the next 12 months.
Inventory remains low at a 4.4 month supply, with 316,000 new single-family homes for sale, 33.3 percent lower than April 2020. Completed homes continue to fall as a share of the market, representing only about 11 percent of the inventory in April, compared to 24 percent a year ago.
The median sales price was $372,400, up from the $310,100 median sales price posted a year earlier.
Regionally on a year-to-date basis new home sales rose in all four regions, up 50.7 percent in the Northeast, 45.7 percent in the Midwest, 45.5 percent in the South, and 3.6 percent in the West. These significant increases are due in part to lower sales volume during the Covid crisis a year ago.