Sales of new homes rose 12% last month, according to data released Wednesday by the Census Bureau and the Department of Housing and Urban Development, but fell sharply from December 2020 levels.
The seasonally adjusted annualized rate of new homes sold rose to 811,000 in December from a downwardly revised rate of 725,000 in November. New home sales, however, were down 14% from the December 2020 rate of 943,000. The rate reflects the number of new homes that would be sold in a year at that month’s rate.
Home sales and prices rose dramatically in 2020 as the pandemic and a flood of fiscal and monetary stimulus triggered intense demand for new homes. But widespread supply shortages and a severe shortage of homes on the market have slowed sales in 2021 while maintaining intense upward pressure on prices.
The median sale price for a new home in December was $377,000 and the average sale price was $457,000.
“Significant shortages of materials, land and labor are permanent headwinds for builders who are experiencing the most active period of demand since the last housing bubble,” wrote Grant Thornton economist Yelena Maleyev, in Wednesday analysis.
“House prices have risen at an astronomical rate in 2021 as strong demand fueled by ultra-low mortgage rates has been met with a significant shortage of available homes,” she continued.
The COVID-19 pandemic has exacerbated the lack of affordable housing and years of steadily rising housing prices. A slowdown in construction, supply chain issues, lumber shortages and other pandemic-related hurdles have prevented builders from filling a massive backlog, while low interest rates and lockdowns have resulted in a sharp increase in demand.
Impending Federal Reserve rate hikes could make mortgages slightly more expensive and dampen demand, but it’s unclear when and if homebuilders will be able to catch up.
The Building Back Better Act, President BidenJoe Biden Ukraine’s president calls for preemptive sanctions against Russia’s representative in New Mexico for introducing bill offering asylum to Canadian truckers protesting vaccination mandatesThe sweeping climate and social services bill included $150 billion to build, repair and remove barriers to affordable housing. Even so, these provisions are likely to be removed from the package after Sen. Joe ManchinJoe ManchinCollins Highlights Need for Voter Count Law Reform: ‘Peaceful Transfer of Power Shouldn’t Require Heroes’ Pics of the Week: Ukraine, Super Bowl LVI and Penguins (DW.Va.) torpedoed the bill during a December interview.
The housing investments of the Build Back Better plan could also take months or even years to make a dent in the severe shortage of affordable housing.
“Buyers will continue to face record house prices and bidding wars well into 2022, even as supply increases. High material prices and the construction of more high-end homes add insult to injury. to insult,” Maleyev wrote. The current supply of homes on the market, she added, is sufficient to satisfy less than two months of demand at the current rate of sales.
“Lack of supply, particularly at the entry level, will remain a barrier in 2022. High prices and bidding wars will continue to drive away some potential buyers,” she wrote.