Sales of New Houses Drop in June on Supply Constraints
New-home sales fell in June for the third consecutive month as the lack of available properties remained a hurdle for house-shoppers who sought to take advantage of low mortgage rates.
Builders sold 676,000 houses at an annualized and seasonally adjusted pace, down 6.6% from the revised May rate of 724,000 and 19% below the year-ago month, the Commerce Department said Monday in a report that counts signed contracts as sales. Economists surveyed by Trading Economics expected sales to rise 1.4%.
“The declining trend that we have seen since the start of the year is an accurate reflection of builders slowing the pace of contracts in the face of building materials delays and higher costs and the ongoing shortages of labor and access to lots,” said Robert Dietz, chief economist at the National Association of Home Builders.
Although demand remains strong, homebuilders are limiting new home construction as supply-chain issues related to the global pandemic persist, he said. Even with a retreat in lumber prices in recent months, lumber now costs $40,000 per home compared to $10,000 before the pandemic occurred, Dietz said.
The median sales price of new houses sold in June was $361,800, a gain of 6.1% from a year ago, the Commerce report said.
There is the possibility that higher home prices resulting from an increase in the price for materials “has the ability to price out a growing number of potential homebuyers,” Dietz said.
“We’re watching prices closely,” he said. “At some point, those higher costs are passed along with consumers and you want them to rise with income growth.”
Three of the four U.S. regions posted sales declines in June, led by a 28% decrease in the Northeast and a decline of 5.1% in the West region that includes California, the nation’s most populous state, the report said. New-home sales in the South dipped 7.8%.
Demand for real estate has been boosted during the pandemic by sub-3% mortgage rates. The average U.S. rate for a 30-year fixed mortgage was 2.98% in June, according to Freddie Mac.
The Federal Reserve began buying mortgage-backed securities last year to keep credit flowing amid the economic jolt caused by the pandemic, which boosted competition for the bonds and put downward pressure on rates. The central bank meets this week with the future of its asset-purchasing program on the agenda.