Prior to May, new home sales had bounced back and forth between rising and falling in each month. But things changed in May. For the first time this year, new home sales fell for the second month in a row.
New data from the Census Bureau and the Department of Housing and Urban Development shows that new home sales fell by 5.9% in May, matching the decline seen in April. According to analysis from the National Association of Home Builders, May’s pace of new home sales was the lowest of the year.
Additionally, NAHB notes that the new home sales data for April, March, and February were all revised down by the Census and HUD, meaning that each month’s actual new home sales results were actually worse than originally projected.
NAHB notes that the rising cost and limited availability of building materials drove new home prices up by 18% over May 2020, which contributed to the second straight month of slower sales.
“New home prices have increased over the last year due to higher material costs and delays for deliveries,” said NAHB Chairman Chuck Fowke. “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.”
According to NAHB, a recent survey showed that approximately 20% of builders have recently limited their sales activity in order to deal with the supply and labor issues affecting new home construction.
That’s helping to drive up prices for new homes. According to NAHB, the median sales prices for a new home in May was $374,400, up from $317,100 in May 2020.
“Entry-level buyers are being most affected by higher prices,” said NAHB Chief Economist Robert Dietz. “Just a year ago, shares of sales priced below $300,000 accounted for 44% of sales, while this May it has dropped to 26%.”