High prices, construction bottlenecks crimp new-home sales in January

by John Yellig

New-home sales dipped in January as rising home prices and construction delays hampered the pace of transactions. 

Sales fell 4.1% from December’s revised number to a seasonally adjusted, annual rate of 801,000, while the median sales price jumped to $423,300 from December’s revised price of $395,500, the U.S. Census Bureau and the U.S. Department of Housing and Urban Development reported.  

On a year-over-year basis, the pace of new-residential sales measured in January was down 19.3%.  

The seasonally adjusted estimate of new houses for sale at the end of January was 406,000, representing a supply of 6.1 months at the current sales rate, according to a press release 

The share of completed homes sold fell during the month, while the share of under-construction homes sold rose — “Clear signals that builders continue to grapple with construction delays due to ongoing supply-chain issues and higher material costs,” First American Deputy Chief Economist Odeta Kushi said in a press release. Similarly, Kushi said, the share of completed or ready-to-occupy homes declined, while the share of new-home inventory that is not started increased. 

“Builders are entering 2022 with backlogs that they are having a hard time completing due to material and labor shortages,” Kushi said. “And new-home prices are sitting near a historic high. Demand for new homes remains strong, as there is a lack of existing-home inventory, but rising new-home prices may be pricing out some buyers.” 

By region, the number of new homes sold in the Northeast fell 10.7% month over month to 25,000, while it fell 7.4% in the South to 438,000 and 3.7% to 78,000 in the Midwest. It rose 1.2% in the West to 260,000. 

“Despite this temporary decline,” RCLCO Real Estate Consulting principal Kelly Mangold said of the national dip in sales, “housing has continued to be one of the hottest sectors of the economy throughout the pandemic, with growing demand from millennials overlapping with pandemic-related desires for more space or higher-quality housing. As winter ends and we move toward spring buying season, there is much to remain optimistic about in the months to come.” 

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