Three consecutive months of declining new home sales. First annual decline since beginning of COVID pandemic.
New Home Sales Continued to Slip in June 2021
According to a recent study by the US Census, new home sales in June fell -6.6% m/m from May. June was the third consecutive month of falling new home sales plus the first annual decline of new home sales since the onset of the COVID-19 pandemic.
The pace of new home sales in June was also -19.4% below June 2020’s sales pace.
Average Price of New Homes Up Approximately +6% y/y
The median sales price of new homes sold in June 2021 was $361,800 in June 2021. The average sales price was $428,700.
Danielle Hale, Chief Economist with realtor.com, indicated that high prices of new homes were the primary culprit of lagging new home sales rather than overall inventory issues. Hale said, “As more existing home sellers return to the housing market, builders may have to compete with better-priced existing homes even as they navigate higher costs for materials and labor needed to build homes.”
Hale added that prices for the segment of new homes yet to be built are up an eye-popping +84% y/y. “And those homes continue to sell quickly once complete – within 3.5 months.”
Regional New Home Sales
The South was far ahead in the race to sell new homes. The South led with a seasonally adjusted pace of 367,000 in June. The West sold 186,000 new homes in June and the Midwest sold 92,000. The Northeast sold only 31,000 new homes in June, down -27.9% in May and down -40.4% from June 2020.
Demand for New Homes Projected to Remain Hot
Mathew Speakman, economist with Zillow, believes that home shoppers continue to favor new builds over the “ultra-competitive” resale sector of the market (regardless of the data mentioned in this post). Speakman said, “This demand should offer support for sales volume for the foreseeable future, buying time for these supply-related constraints to slowly ease and allowing for a return to growth in the months that follow.”
Speakman added, “Annual comparisons will get even more difficult in coming months, as it was this time last year that the market began to surge and recent highs not seen since before the Great Recession.”
Mortgage Perspective on New Home Sales in June
New home purchase mortgage applications dropped -23.8% y/y, according to the Mortgage Bankers Association (MBA) Builder Application Survey. In its month-over-month comparison, the MBA indicated that new home purchase mortgage applications dropped -3% in June 2021 from May 2021.
The average loan size of new homes increased from May’s $384,323 to $392,370 in June.
Joel Kan, associate vice president of economic and industry forecasting with the MBA, said, “Homebuilders are encountering stronger headwinds of late, as severe price increases for key building materials, rising regulatory costs, and labor shortages impact their ability to raise production. This has dampened new home sales and quickened home price growth. Additionally, still-low levels of for-sale inventory are also pushing prices higher as competition for available units remains high among prospective buyers.”
Thanks to the Mortgage Bankers Association, US Census, Zillow, realtor.com, and HousingWire.