KB Home’s construction of single-family homes is shown under construction in the Valley Center community, California, the United States, June 3, 2021.
Mike Blake | Reuters
There are several signs in the newly built home market that suggest a potential slowdown in home builders in the country.
The data released on Tuesday added evidence that builders are pulling out.
The number of single-family homes continued to rise in June, many of them for homes that have already been sold. But building permits, an indicator of future construction, fell more sharply than expected last month to their lowest level since August and, according to the US Census Bureau, were around 100,000 units below the six-month average.
“The single-family market in particular desperately needs more new homes, especially at the lower end, where first-time buyers need price relief and more choice, but we also know that it is becoming increasingly difficult to deliver from a builder perspective at the desired price points,” said Peter Boockvar , Chief Investment Officer of the Bleakley Advisory Group.
Elsewhere in the market, mortgage applications for newly built home purchases fell nearly 24% year over year in June, according to the Mortgage Bankers Association. That was the third month in a row with a decline.
“Home builders have been facing stronger headwinds recently as sharp price increases for key building materials, rising regulatory costs and labor shortages hamper their ability to increase production. This has dampened new home sales and accelerated home price growth,” said Joel Kan. an MBA economist.
The average loan amount also hit another record high at $ 392,370.
“In addition to price increases, we are also seeing fewer purchases in the lower price brackets as more of these potential buyers are being priced out of the market, which continues to put upward pressure on loan balances,” added Kan.
The latest developments come after the coronavirus pandemic brought the hottest year for both housing demand and housing construction in more than a decade.
Sentiment among builders, while still high, fell in July, with builders citing continued pressure on construction costs. Timber prices, which soared during the pandemic and hit a record high just a few months ago, have fallen dramatically. So far, however, these savings have not reached consumers or builders. The prices for other materials also continue to rise.
“The recent weakening of single and multi-family permits is due to higher material costs, which have driven up new building prices since the end of last year,” said Robert Dietz, chief economist at the Federal Association of Building Owners. “This is a challenge for a housing market that needs additional inventory.”
Builders are also hampered by supply chain and labor issues.
“Reports have surfaced across the country of several months of delays in the delivery of windows, radiators, refrigerators and other items, delaying the delivery of homes and forcing builders to cut back on their activities, and many builders continue to point to a lack of available labor than separate challenge, “said Matthew Speakman, an economist at Zillow.
According to the census in May, the median price of a newly built home increased by 18% compared to May 2020. The prices for existing properties have also increased by double digits compared to the previous year. While mortgage rates have fallen significantly in recent weeks, this is not enough to offset the high price gains.