Pandemic Housing Boom Is Officially Over As New Home Sale Plummet To Pre-Pandemic Lows
The pandemic housing boom is officially over! The U.S. Census Bureau is stating sales of newly built homes dropped in June to the lowest level since the early days of the coronavirus pandemic in April 2020.
Sales of new single family homes fell to an annualized rate of 676,000. This is 6.6% below May’s rate of 724,000. Sales figures are also 19.4% below the June 2020 level of 839,000.
Analysts were expecting new home sales to increase by 3.4% in June.
Newly built homes are now out of reach for much for most Americans.
This is due to a year of frenzied buying that caused prices to increase by double digits.
The median price of a newly built home in June rose just 6% from June 2020. However, it is nothing compared with the 15%-20% annual gains seen in previous months.
The Pandemic Housing Boom Squeezed Affordable Housing Out Of The Market
Most of the homebuying is on the higher end of the market, and builders cannot afford to put up affordable homes due to skyrocketing construction costs.
Softwood lumber spiked more than 300% during the pandemic. Lumber has fallen back dramatically in the last month. However, lumber is still about 75% above its 2019 average. Other lumber products are still significantly more expensive.
The inventory of new homes for sale jumped from a 5.5-month supply in May to a 6.3-month supply in June. Last fall, it sat at a low of just 3.5 months. In June, the number of homes for sale that had not yet been started hit an all-time high.
Buyers in June were also hit with higher mortgage rates. This caused a spiked of about a quarter point during the month. This means homebuyers have less of a financial cushion to absorb higher mortgage rates.
Single family housing starts continue to gain, albeit slowly and not on the lowest end of the market. Permits, an indicator of future construction, are not as robust as the market needs.
While there is unquestionably still strong demand from buyers, much of it is being squelched by affordability and supply issues. Those signs clearly showed up at builder home sites in June and have been a factor in weakening homebuilder sentiment for the past two months. Noted builder analyst Ivy Zelman wrote as much in a note last month.
“We are shifting our tone on the housing market based on our analysis of proprietary data showing early signs of a cool down,” according to the note.