After a disappointing October, new home sales rose 12.4% month-over-month in November to 744,000 according to data released by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau on Thursday.
Despite this increase, the sale of new homes is still down 14% compared to a year prior.
“Our members are seeing strong buyer traffic as continued low mortgage rates are helping fuel sales,” Chuck Fowke, chairman of the National Association of Home Builders (NAHB) said in a statement. “However, builders are still grappling with major supply chain issues and soaring materials costs, which are causing construction delays.”
In addition to causing construction delays, rising material costs, and supply chain and labor shortages, have resulted in a rise in median sales price. According to HUD and the U.S. Census Bureau, the median sales price of a new home was $416,900 in November, an 18.8% year-over-year increase.
“Despite the increase in sales, housing affordability remains a major concern,” Danushka Nanyakkara-Skillington, NAHB assistant vice president of forecasting and analysis said in a statement. “With building material pricing, the challenge for builders in 2022 will be to deal with higher input costs while making sure home prices remain within reach for American home buyers.”
Homebuilders are also having to contend with increased buyer demand due to record low inventory of existing homes, as well as buyers who are hoping to get in a home before mortgages rates rise in the new year.
“Borrowing costs remain low, demographic-fueled demand is strong and existing-home inventory remains near record lows, making a new home an attractive option,” Odeta Kushi, First American deputy chief economist said in a statement. “Yet higher construction costs (labor, lumber, materials) are being passed on to buyers, resulting in higher new-home prices.”
Currently an estimated 402,000 new homes are available for sale nationwide, which represents a 6.5 months’ supply at the current sales rate.
On a regional level, new home sales fell on a year-to-date basis in all four regions with the West seeing the largest decrease at 12.5% and the Northeast seeing the smallest decrease at 1.3%.