Sales of New Homes Plummet Amid Higher Prices
December 27, 2021
For many buyers, the price of a newly built home may have gotten too high. Sales of new homes saw an unexpected drop in November, declining 14% from a year earlier, according to the U.S. Census Bureau. October’s sales numbers were also revised down, bringing the month’s sales to the lowest level since the pandemic began.
At the same time, prices of newly built homes surged 19% higher than in November 2020. The increase came even as the month saw the supply of new homes rise, which analysts expected to push prices lower, but with inventories of existing homes at historic lows, demand still far outpaces supply.
Prices for existing homes sold in November were up 13% from the same month a year prior, with low inventory driving up prices. At the current sales pace, there is barely a two-month supply of existing homes.
Robust demand is only one factor driving the prices of newly built homes. Builders have struggled all year with labor shortages, higher material prices, and supply chain disruptions, and they are in turn passing their higher prices onto buyers. Some buyers have also slowed sales intentionally, concerned that supply chain disruptions and a lack of workers may mean they cannot deliver on time.
Realtors are expecting lower home sales next year as higher mortgage rates make already expensive homes even less affordable.