Rising Material Costs Hinder New Home Sales

The lack of previously owned homes for sale is an opportunity for home builders. There are, after all, plenty of buyers. So, in a market with low inventory, a builder could be reasonably confident that the homes they built would be purchased, and quickly. So why then do recently released numbers from the U.S. Census Bureau and the Department of Housing and Urban Development show new home sales falling? Well, part of the problem is the rising price of building materials. Costs have skyrocketed over the past year and made it more difficult for builders to build the affordable homes buyers want most. In fact, the median sales price of new homes sold in May was $374,400. The average sales price was $430,600. At the same time, new homes below $200,000 accounted for just 2 percent of all transactions. In other words, it’s getting more expensive to build new homes, which, of course, makes them more expensive to buy. Still, despite the challenges, new home sales are still over 9 percent higher than last year at the same time. (source)

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