According to a May 2021 report from the National Association of Home Builders (NAHB), Washington, D.C., increases in the cost of building materials, combined with low inventory, have caused new home sales prices to jump 20% on a year-over-year basis. This is hurting housing affordability and driving down the pace of new home sales. The median sales price in April 2021 was $372,400, up from the $310,100 median sales price posted a year earlier.
In specific, sales of newly built, single-family homes fell 5.9%, following a significant downward revision of the March estimate, to a seasonally adjusted annual rate of 863,000 units. According to the NAHB, a new home sale occurs when a sales contract is signed or a deposit is accepted, and the building can be in any stage of construction (not yet started, under construction or completed).
The 863,000 April rate indicates how many homes would sell if this pace were to hold steady for the next 12 months, while adjusting for seasonal effects.
“Higher prices have priced out buyers, particularly at the lower end of the market. A year ago, 45% of new home sales were priced below $300,000. In April 2021, only 27% of new home sales were priced below $300,000,” said Robert Dietz, chief economist and senior vice president for economics and housing policy for the NAHB
“Affordability factors are clearly affecting new home sales,” said Chuck Fowke, chairman of the NAHB. “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.”
Fowke added that policymakers need to either facilitate additional domestic production, or, where that’s not feasible, suspend tariffs to allow for more imports in order to improve the supply chain.
Inventory of available single-family homes remains low at a 4.4-month supply, with 316,000 new single-family homes for sale. This is 33.3% lower than it was in April 2020. Additionally, the number of completed homes continues to decline as a “share of the market, representing only about 11% of the inventory in April, compared to 24% of the inventory one year ago.”