Affordability in the new home market is rapidly declining

New Home Market Affordability Decreasing Rapidly | Realtor Magazine

New home buyers face even higher prices. The median selling price of a newly built single-family home rose to $423,300 in January, up more than 13% from a year ago, according to data from the National Association of Home Builders. Higher development costs and rising building material prices are to blame, builders say. “New home prices continue to rise as the cost of materials rises,” says NAHB chief economist Robert Dietz. “Rising mortgage rates will dampen demand for home purchases through 2022, and the Russia-Ukraine crisis will add near-term volatility to the bond market.”

Sales of newly built single-family homes fell 4.5% month over month in January, the Census Bureau and the Department of Housing and Urban Development reported Thursday. However, buyer demand remains high as inventory is tight, builders say. “Builders are grappling with supply chain issues that are extending construction times and driving up costs,” said NAHB President Jerry Konter. “Policy making should focus on reducing production bottlenecks, especially in timber and other building materials.”

Despite the challenges, new home sales rose 34.4% from a year ago. But builders say material and price bottlenecks are preventing them from ramping up production.

Regionally, new home sales saw declines in three of four major U.S. regions last month, led by a 10.7% drop in the Northeast, a 7.4% drop in the South and a 3.7% decline in the Midwest. The West was the only region in the United States to post an increase last month, with new home sales rising 1.2%.

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