Affordability problems hit new home sales

New single-family home sales edged upwards slightly in August, but the rise wasn’t enough to impress economists or make up for the shortfall in existing home inventories.

In August, sales of new homes rose by 3.5 percent to a seasonally adjusted rate of 629,000 units, but the uptick was off of significantly revised downwardly reports from June and July, the U.S. Commerce Department reported last week. The revised reports indicate a soft patch overall in new-home sale activity this summer.

Robert Dietz, chief economist of the National Association of Home Builders, said that housing affordability has “taken a toll” on the new home market this summer, and warned that volatility could lie ahead following the damage caused by Hurricane Florence.

“Still, we expect the overall housing market to grow this year as demand continues to increase among millennials and other newcomers,” Dietz noted in a blog post.

The Commerce Department’s report shows that the median sales price for a new home in August was approximately $320,000, which is up 1.9 percent compared to one year ago. However, builders have recently warned that a fresh round of tariffs on China by President Donald Trump, which include a number of critical building materials, could force them to up their prices in the coming months.

In addition, builders are still struggling with a labor shortage that could also drive up prices.

“Housing affordability remains a serious concern and builders must manage supply-side costs and stiff regulatory hurdles to keep prices competitive,” said Randy Noel, the NAHB’s chairman.

Years of under-building by homebuilders in the the U.S. have left the country with a shortfall of 4.6 million housing units in the years since 2000, according to Freddie Mac economists.