Declining Affordability Conditions Dampen New Home Sales
Worsening affordability conditions stemming from growing supply chain disruptions and rising mortgage rates pushed new home sales lower in March.
Sales of newly built, single-family homes in March fell 8.6 percent to a 763,000 seasonally adjusted annual rate from an upwardly revised reading in February, according to data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. New home sales are down 12.6 percent compared to March 2021.
“Growing affordability challenges are slowing new home sales and taking a toll on the housing market,” says Jerry Konter, chairman of the National Association of Home Builders. “Mortgage rates jumped nearly a full percentage point between the end of February and March and builders continue to face escalating construction and development costs which are putting upward pressure on new home prices.”
“Buyers are facing sticker shock due to deteriorating affordability conditions and a lack of existing home inventory,” says Danushka Nanayakkara-Skillington, NAHB assistant vice president of forecasting and analysis. “Only 14 percent of new home sales in March were priced below $300,000. A year ago, it was 34 percent.”
New single-family home inventory was up 52.4 percent over last year, rising to a 6.4 months’ supply, with 407,000 available for sale. However, just 35,000 of those are completed and ready to occupy.
The median sales price rose to $436,700 in March from $421,600 in February and is up more than 21 percent compared to a year ago, due primarily to higher development costs, including materials.