After a significant downward revision for the preliminary March data, April recorded a decline of 5.9% for sales of newly-constructed single family homes, according to estimates from the Census Bureau and HUD. The April seasonally adjusted annual rate (863k) was the lowest since June 2020, with the exception of a weather-influenced February report.
Residential demand continues to be supported by low interest rates, a renewed consumer focus on the importance of housing, and solid demand in lower-density markets like suburbs and exurbs. However, higher building costs, longer delivery times, and general unpredictability in the residential construction supply-chain are now having measurable impacts on new home prices. In April, the median price of a newly-built home was 20% higher than a year ago, at $372,400. As NAHB has estimated, higher lumber costs alone are increasing new home prices by $36,000 on average.
Higher costs 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.
Looking back to the spring of last year, the April 2020 data (570,000 annualized pace) marks the low point of sales for the 2020 recession. The April 2020 rate was 26% lower than the prior peak, pre-recession rate set in January. Sales then mounted a historic surge from April until July, outpacing gains in actual construction. Sales have been above the pace of the post-Great Recession trend since the second half of last year. However, since January the trend has been declining and approaching the prior long-run growth trend (as indicated by the blue dashed line in the graph above).
Sales-adjusted inventory levels remained lean in April, coming in at a 4.4 months’ supply.
Completed ready-to-occupy homes continue to fall as a share of new home inventory. Such homes were 24% of inventory a year ago. They are only a little more than 11% of the total in April 2021.
Moreover, to see how sales patterns have changed in a high demand, low supply market — a year ago, 42% of new home sales were completed construction. In Apr 2021, this share has fallen to 27%. A year ago, 21% of new home sales had not started construction yet. In April 2021, such speculative homes represented 38% of sales contracts.
Regionally on a year-to-date basis new home sales rose in all four regions, up 50.7% in the Northeast, 45.7% in the Midwest, 45.5% in the South, and 3.6% in the West. These significant increases are due in part to lower sales volume during the Covid crisis a year ago.