The housing industry has been on fire since the six-week shutdown last year due to the pandemic. New home sales surged 20.4% from the prior year, with the median sales price only increasing 2.9%. This year, new home sales are up 33.7% over the same period in 2020. In April, the median sales price for new homes was up 10.5% over the median sales price for 2020. Builders have been artificially holding back on sales because of huge backlogs, the escalating cost of materials, material and labor availability, and concerns regarding depletions of their developed lot supply.
On May 7, lumber futures for May delivery were $1,645 per 1,000 board feet. The year-over-year increase since May of 2020 was 374%. Construction schedules have been disrupted because of exceptionally long lead times for delivery of critical materials such as cabinets, doors, door hardware, and appliances, etc. Some home builders have cut off sales completely, while others have put monthly limitations on sales. Most builders have been aggressively raising prices to cover added construction costs and to slow down sales. April new home sales did experience a drop of 5.9% from the sales rate registered in March.
During 2020, total housing starts increased 6.9% over 2019, with single-family starts up 11.6% and multifamily starts registering a 3.3% loss of activity. Year-to-date total housing starts are up 20.6% over the same period in 2020, with single-family housing starts increasing 28.0% and multifamily starts gaining 5.7%. Total housing starts in April were down 9.5% from March, with a 13.4% drop in single-family starts and a 4.0% increase in multifamily starts.
Currently, the availability of new or existing housing inventory is virtually non-existent. There were only 2.4 months of existing homes and 4.1 months of new homes for sale in April. Both new and existing housing should have about 6.0 months of inventory available for sales. Existing homes were only on the market for an average of 17 days. Existing home sales have been down for the last three months which could be due to the lack of inventory, rapidly increasing sales prices, or the increase in interest rates. Since both new and existing home sales showed some softening during April, this trend should be watched very closely. This is especially concerning since we are beginning to see strong inflationary pressures in the economy because of all the fiscal stimulus which could lead to a fairly rapid increase in mortgage interest rates and the deteriorating affordability of both new and existing housing because the lack of inventory.
For a better understanding of the housing market over the next 10 years, download my report The Roaring 2020s: Housing’s Best Decade
from our website. This decade will be a seller’s market for the home building industry. We may have some bumps in the road, but they will not be due to a lack of demand.
to view and/or download the full set of current housing charts.