After dropping 2.0% in February, new home sales were down yet again in March, decreasing 8.6% from the month prior to a seasonally adjusted annual rate of 763,000, according to data released by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau on Tuesday.
Year over year, new home sales were down 12.6% in March.
“Fewer new homes are being sold because the shortages of construction materials are delaying building timelines,” Holden Lewis, a home and mortgage specialist at NerdWallet, said in a statement. “Builders have trouble buying everything from windows to roof shingles. As a result of the scarcity, builders are selling homes closer to when the homes are completed and ready to occupy.”
Lewis remains optimistic that new home sales will pick up once supply chain issues, as well as labor and material shortages, get sorted out.
“Growing affordability challenges are slowing new home sales and taking a toll on the housing market,” Jerry Konter, chairman of the National Association of Home Builders (NAHB) added in a statement. “Mortgage rates jumped nearly a full percentage point between the end of February and March and builders continue to face escalating construction and development costs which are putting upward pressure on new home prices.”
In March, the median sales price of a new home was $436,700, up from $421,600 a month prior.
“Buyers are facing sticker shock due to deteriorating affordability conditions and a lack of existing home inventory,” NAHB assistant vice president of forecasting and analysis, Danushka Nanayakkara-Skillington, said in a statement. “Only 14% of new home sales in March were priced below $300,000. A year ago, it was 34%.”
At the end of March, an estimated 407,000 new homes were still for sale. At the current sales rate represents a 6.4 months supply at the current sales rate, which is a 52.4% year-over-year increase. However, only 35,000 of the 407,000 are completed and ready to be occupied.
New home sales were down month over month in all four major U.S. regions, with the South seeing the largest drop at 10.2%, followed by the Midwest (8.7%), the West (6.0%) and the Northeast (5.4%). Year over year, the Northeast and the West both saw new home sales increases of 12.8% and 21.0%, respectively, while the Midwest and the South saw annual decreases of new home sales of 13.8% and 24.7%, respectively.
As the pace of new home sales has decreased, homebuilder confidence has also dropped. In April the National Association of Home Builders (NAHB) and Wells Fargo Housing Market Index (HMI) fell to 77, marking the fourth consecutive month of declines. Experts blame diminishing sales traffic and the sharp jump in mortgage rates for declining builder confidence.