US Census Bureau<\/a> has left some housing experts wondering whether the party\u2019s over for the new construction market.<\/span><\/p>\nJune\u2019s new residential sales report pointed to a 6.6 percent monthly decline in the number of new single-family home sales, which amounted to 676,000 annualized units. Compared to June 2020\u2019s summer sales surge \u2014 fueled by pent-up buyer demand and low mortgage rates \u2014 home buying activity dropped 19.4 percent to the lowest level in 14 months.<\/p>\n
June also marked the third consecutive month of declining new home sales, largely attributed to homebuilders limiting supply as they grappled with backlogs and high material costs. Some builders are reportedly pressing \u2018pause\u2019 on new project launches until conditions normalize, understanding that buyers will be less receptive to sky-high home prices.<\/p>\n
The median price of a new home sold in June rose to $361,800, an increase of 6 percent year-over-year. Faced with sticker shock, many Americans are planning summer vacations instead of trips to new home sales centers.<\/p>\n
\u201cSome of the slowing in the sales pace likely reflects a move toward normalization in homebuying demand following the pandemic-related surge,\u201d wrote <\/span>Doug Duncan, Chief Economist at Fannie Mae.<\/span><\/p>\n\u201cA recent measure of homebuilders\u2019 sentiment revealed a pullback in the buyer foot traffic metric, which reached the lowest level in nearly a year, while the June 2021 Fannie Mae Home Purchase Sentiment Index\u00ae showed a further increase in the share of respondents indicating it\u2019s a bad time to buy a home,\u201d he added.<\/p>\n
New home inventory improved from a 5.5-month supply in May to a 6.3-month supply in June at the current pace of sales. At the month\u2019s end there were an estimated 353,000 new homes listed for sale on a seasonally adjusted basis. The\u00a0share of pre-construction homes listed for sale climbed 11.7 percent to 353,000, while completed home sales dropped near record lows.<\/p>\n
In response to dwindling demand caused by soaring home prices,\u00a0Capital Economics\u2019 Matthew Pointon wrote that \u201ca return to the boom of last year is not on the cards.\u201d However, new\u00a0home sales are expected to pick up somewhat during the coming months as lumber prices fall and labor shortages ease. \u201cWe suspect new home sales will end the year at around 850,000 annualised,\u201d added Pointon.<\/p>\n
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<\/a>Photo: James Bombales<\/em><\/p>\n