February New-Home Sales Drop to Slowest Pace Since May

While housing inventory resulted in existing home sales taking a hit in February, rising costs and delays caused new-home sales to dip as well. Building material costs, delays, rising mortgage rates and home prices impacted housing affordability in February, reports CNBC. From January, new-home sales dropped 18%, bringing sales down to the slowest pace since May 2020. Chuck Fowke, chairman of the National Association of Home Builders, says buyer traffic remains strong but material shortages are greatly impacting home building activity. Lumber prices, which currently exceed $1,000 per thousand board feet, are bringing home prices up by $24,000 on average.

Higher interest rates, supply shortages and rising material prices are weakening affordability, pushing the median price of a new home in February up just over 5% annually.

There are other, more telling data points, as well.

The number of homes sold before construction began rose 20% year over year in February, according to the Census Bureau.

This shows that, in the context of the broader housing market, builders are seeing increased delays in getting their products to their buyers. Some of the big public builders have said in earnings releases that they are delaying construction, so as not to be building while material costs are at their latest peaks.

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