Higher interest rates, supply shortages and rising material prices, particularly for lumber, put a damper on new home sales in February. Sales of newly built, single-family homes fell 18.2 percent to a 775,000 seasonally adjusted annual rate, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. This is the lowest level since last May.
“Though buyer traffic remains strong, some home building activity is being delayed due to material shortages,” said Chuck Fowke, chairman of the National Association of Home Builders (NAHB) and a custom home builder from Tampa, Florida. “This is forcing builders and buyers to grapple with rising affordability issues, as soaring lumber prices have added more than $24,000 to the price of a new home.”
“While rising material costs and other supply-side issues are causing delays for some projects, other factors contributing to the slowdown include the winter storms in areas like Texas and rising mortgage rates, which are up more than 30 basis points over the past five weeks,” said NAHB Chief Economist Robert Dietz.
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 February reading of 775,000 units is the number of homes that would sell if this pace continued for the next 12 months.
Inventory rose slightly to a 4.8 months’ supply, with 312,000 new single-family homes for sale, 12.7 percent lower than February 2020. Homes available for sale that have not started construction are up 67 percent over last year, an indicator of increasing delays and higher costs associated with construction.
The median sales price was $349,400, up 5.3 percent over the $331,800 median sales price posted a year earlier.
Regionally on a year-to-date basis new home sales declined 9.3 percent in the West, and rose in the other three regions, up 6 percent in the Northeast, 24.7 percent in the Midwest and 23.2 percent in the South.