A spring slowdown is occurring in both the resale and new home markets, brought on by low inventory and surging prices.
In May, the seasonally adjusted annual rate of new home sales fell to an estimated 769,000 transactions, the lowest level in a year, according to the Census Bureau. New construction single-family home sales declined 5.9 percent month-over-month but remained 9.2 percent above May 2020 when 704,000 deals were inked.
The median sales price of a newly constructed home rose to $374,400, up 2.5 percent monthly and 16.6 percent over the same period last year. The high price of lumber, which peaked on May 10th at $1,711 per thousand board feet, increased the cost of a new home by nearly $36,000, according to an analysis by the National Association of Home Builders (NAHB). Many homebuilders opted to delay construction on new projects due to the lumber shortage and the soaring prices that came as a result of it.
There were 330,000 new single-family homes for sale in May, a 4.8 percent improvement over April’s inventory of 315,000 homes. Compared to May 2020, supply increased by 5.8 percent, illustrating the ramped-up pace of construction triggered by the growing demand for housing.
May logged a 5.1-month supply of new homes at the current sales pace, a 10.9 percent bump up from April’s 4.6-month supply. Still, unsold inventory is down 3.8 percent from one year ago when there were 5.6 months of supply, approaching ‘balanced’ market conditions.
New home sales plummeted 14.5 percent monthly in the South and were unchanged in the Midwest. Meanwhile, sales jumped 33 percent in the Northeast and 4.8 percent in the West. On an annual basis, new home sales climbed in all regions of the country, led by the Northeast at 57.6 percent, followed by the Midwest at 28.4 percent.
The number of pre-construction homes that were sold in May totaled 276,000, a slight decline from April but 55 percent above the 157,000 sold-but-not-yet-started homes recorded a year ago at the beginning of the pandemic. Pre-construction and under-construction home sales have tapered off since early this year as some buyers have decided to delay their new home purchases until prices stabilize.
However, with lumber futures on a rapid descent, homebuilders could soon begin increasing their output, bringing down prices and attracting more buyers.