Washington, D.C.—New home sales fell to the lowest pace in a year, with prices jumping 18% on a year-over-year basis, due to the high costs and uncertain availability of building materials, lots and labor, according to the National Association of Home Builders (NAHB).
Sales of new, single-family homes fell 5.9% in May to a 769,000 seasonally adjusted annual rate, according to data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The May number follows significant downward revisions to the April estimate and previous months’ readings.
“New home prices have increased over the last year due to higher material costs and delays for deliveries,” said Chuck Fowke, NAHB chairman. “Policymakers must take action to improve supply chains in order to protect housing affordability. While lumber costs have come down in recent weeks, they are still more than 210% higher than a year ago. And OSB prices are up 380% over the last year.”
Robert Dietz, NAHB chief economist, added, “As expected, new home sales have continued to soften this spring. While higher prices have shifted some buyers to the sidelines, NAHB survey data indicates that approximately 20% of builders have limited sales activity in recent months in order to manage supply chains of materials and labor availability.”
A new home sale occurs when a sale contract is signed or a deposit is accepted. A home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the May reading of 769,000 units is the number of homes that would sell if this pace continued for the next 12 months, the NAHB said.
Inventory remains low at a 5.1-month supply, with 330,000 new single-family homes for sale, 3.8% lower than May 2020. The NAHB said supply side challenges remain an issue, with the count of new homes sold that had not started construction, up 76% over the last year. The count of new homes sold that are completed and ready to occupy is down 33%.
The median sales price was $374,400, up 18% from the $317,100 median sales price posted a year earlier.
“Entry-level buyers are being most affected by higher prices,” Dietz said. “Just a year ago, shares of sales priced below $300,000 accounted for 44% of sales while this May it has dropped to 26%.”
Regionally on a year-to-date basis new home sales rose in all four regions, up 48.7% in the Northeast, 33.5% in the Midwest, 32.3% in the South and 5.6% in the West, the NAHB said. The significant increases are due in part to lower sales volume during the COVID-19 crisis a year ago, the group added.