The trends of rising interest rates and lumber prices, paired with supply shortages, pushed new home sales to a 10-month low in February.
Sales of newly built, single-family homes plunged 18.2% to a 775,000 seasonally adjusted annual rate – marking the lowest level since May 2020, data from the US Department of Housing and Urban Development and the Census Bureau showed. The February reading of 775,000 units is the number of homes that would sell if this pace continued for the next 12 months.
“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). “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.”
The median sales price was $349,400, up 5.3% from the $331,800 posted in 2020. Inventory increased slightly to a 4.8 months’ supply, with 312,000 new single-family homes for sale. This is 12.7% lower than February a year ago. Homes available for sale that have not begun construction yet shoot up 67% year over year indicate increasing delays and higher costs associated with construction.
“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.
Regionally on a year-to-date basis, new home sales fell 9.3% in the West and jumped in the three other regions: up 6% in the Northeast, 24.7% in the Midwest, and 23.2% in the South.