Home builders have been forced to stop taking new orders from hungry buyers in an unprecedented move that’s been taken to catch up with record-high sales over previous months.
Builders in the U.S. have faced dozens of challenges as they bid to complete projects that are currently underway. Among them, surging costs of building materials and a shortage of appliances and skilled labor, all holding back projects.
“Through our history, to have somebody walk into our modes and [to have to] tell them, ‘We don’t have a house for you to buy today’ is something that is entirely foreign to us,” said D.R. Horton Inc. Chief Executive David Auld in a July earnings call.
D.R. Horton is one of several home building firms that is restricting the number of units for sale. But by doing so, it’s putting further pressure on new home prices. In June, the median price of a new single-family home jumped 6.1% year over year to $361,800. Meanwhile the average price for new orders rose 31.8%, according to the Wall Street Journal.
“Because builders are intentionally not selling, it’s creating a lot of pricing power,” Alan Ratner, managing director at Zelman & Associates, a real estate research and advisory firm, told The Wall Street Journal.
Some builders have opted to sell homes on a first come, first served basis or through lotteries, the Journal said. Others are effectively holding auctions, asking buyers to submit bids above the list price on new homes, which is another unprecedented move.
Others are simply holding off on selling homes that haven’t been completed yet, before trying to sell them at prices similar to current market rates, rather than locking in a sale and a price months ahead of completion.