Higher Costs Limiting Builds and Sales The expected impact of longer delivery times and higher material costs — plus greater overall uncertainty — had measurable impacts on single-family construction and sales in April. Despite the softening of these measures, builder confidence remains strong in the face of solid demand and inadequate resale inventory. The NAHB/Wells Fargo Housing Market Index (HMI) stood steady at a level of 83 in May, although comments in the HMI survey indicate that concerns continue to grow regarding building materials prices, and labor and lot availability. New home sales declined in April by 6% on a monthly basis to a seasonally adjusted annual rate of 863,000, as the median sales price rose above $372,000 — up 20% from a year ago. In April of last year, 45% of new home sales were priced below $300,000. Today, that share has fallen to 27% as the entry-level market is particularly affected by higher material costs. Because of these challenges, single-family starts fell back 13% in April to an annual rate of 1.09 million. Resale home prices are headed even higher due to lack of inventory, which stands at a mere 2.4-month supply, per the National Association of Realtors. According to the S&P CoreLogic Case-Shiller Index, home prices have increased 13% over the past year — an unsustainable pace, given income levels and an expected rise in interest rates later in 2021. These higher prices have stalled existing home sales, the rate of which fell to a 10-month low in April. Our forecast projects an ongoing readjustment, returning from the recent post-Great Recession high levels of sales and starts to more sustainable long-run trends given current (un)availability of materials, labor and lots. Although not a bubble, the current rate of gains for home prices will increasingly price buyers out of the market. Policymakers need to focus on ways to improve the supply chain, which will ultimately help preserve economic momentum and offset rising inflationary pressure. –NAHB Chief Economist Robert Dietz Eye on Housing Page 6
7 Publizr Home