Real Estate Marketing & Beyond

Builders aren't keeping up with new home demand

By Mike Wheatley | December 30, 2020

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Sales of new homes decreased from October to November due to several headwinds for builders, even though demand remains high.

Data released by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau last week said sales of new single-family homes fell by 11% in November compared to the month before. But despite the monthly dip, new-home sales are still 20.8% higher than a year ago.

“Though the market remains strong, the pace of sales pulled back in November as inventory remains low and affordability concerns persist as builders grapple with a shortage of lots, labor, and building materials,” said Chuck Fowke, chairman of the National Association of Home Builders.

“The home building industry saw a historic gap between the pace of new-home sales and construction of for-sale single-family housing this fall,” adds Robert Dietz, the NAHB’s chief economist. “As a result, the pace of new-home sales was expected to slow to allow construction to catch up. This appears to have occurred in November as inventory of completed, ready-to-occupy new homes was down 43% compared to November 2019 at just 43,000 homes nationwide.”

Inventory increased slightly in November to a 4.1-month supply, with 286,000 new single-family homes for sale. That is 11.2% lower than a year ago. Also, of that inventory, only about 43,000 are completed.

The median sales price of a new home in November was $335,300. A year ago, the median price nationwide was $328,000.

On a year-to-date basis, new-home sales were up annually in all four major regions of the U.S., led by a 28.2% uptick in the Northeast. The Midwest posted a 24% increase, followed by a 20.5% increase in the West and 16.9% in the South.