Rising lumber costs have already been at fault for slowing down the construction of new homes. Now, those costs appear to be slowing down new home sales as well.
New data from the Census Bureau and the Department of Housing and Urban Development shows that new home sales fell by 18.2% from January to February, a significant reversal from the increase seen in January.
According to analysis of the data by the National Association of Home Builders, new home sales have not been this low since May 2020.
NAHB Chairman Chuck Fowke said that despite continued strong interest in new homes, the economics of building a home are becoming an issue for homebuilders.
“Though buyer traffic remains strong, some home building activity is being delayed due to material shortages,” Fowke said. “This is forcing builders and buyers to grapple with rising affordability issues, as soaring lumber prices have added more than $24,000 to the price of a new home.”
As Fowke said, the demand for new homes is still there, demonstrated by the fact that new home sales in February 2021 were up 8.2% from last year.
And as NAHB Chief Economist Robert Dietz noted, there are other mitigating circumstances that could be holding new home sales back.
“While rising material costs and other supply-side issues are causing delays for some projects, other factors contributing to the slowdown include the winter storms in areas like Texas and rising mortgage rates, which are up more than 30 basis points over the past five weeks,” Dietz said.