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New Home Sales Fall to New One-Year Low

New U.S. home sales have fallen to a one-year new low this past May, even though the average price of new homes has soared in the last few months. The prices of new homes have risen astronomically for a variety of reasons, though the raw material shortage is mainly to blame. Framing lumber has become expensive, which in turn is making new homes more expensive. 

The Commerce Department released new data revealing this drop in new home sales. For the past two months, sales have fallen for home manufacturers. Now, with May’s numbers finally in, economists suggest that we could see a few more months of new home sales drops. 

For May, new home sales dropped to about 769,000, a 5.9% drop from the month before. In April, the sales pace was around 817,000 after initially suggested at 863,000. The May 2021 numbers are the lowest they’ve been since May of last year.

Previously, economists believed that new home sales would be at a rate of about 870,000 for May. Instead, the sales were 100,000 what was expected. 

New home sales have actually done rather well during the COVID-19 pandemic. Single-family housing sales increased as many people began to migrate away from cities in the United States. Americans wanted larger homes during the pandemic to allow for home offices, as well as in-home schooling. 

Many analysts now believe that these lower numbers of new home sales could be a sign that home-buying activity is now past its peak. The COVID-19 pandemic put home buying in a bit of a whirlwind, and now everything is settling down. More people are also shifting back to potentially going back to the office and to work, instead of staying home like last year. Staying at home fueled many home sales, which accounts for the higher amount of sales last year. 

New data also reveals that the average new house price has risen by 18.1%, when compared to last year, and is now at $374,400 for May’s numbers. 

Sales have fallen in many areas of the United States, but not all. Southern states saw new home sales fall about 14.5%. Meanwhile, the Midwestern states so no real change, while Northeastern and Western states saw new home sales rise. 

All around, many factors in the housing industry have seen average number drops. For example, applications for home loans have fallen this year as a whole. Housing market surveys on potential buyers have also seen a drop.

Meanwhile, home builders and manufacturers haven’t yet been able to find a solution to their raw material shortage problems. Another report done by IHS Markit revealed that many are struggling to find and purchase raw materials.

Analysts are continuing to be optimistic about these latest May numbers, though. The common belief is that a few more months may reveal new home sales continuing to drop. However, many also believe that the year as a whole will end on a good note, as sales will once again rise later on towards the end of the year (and into the next) as raw material shortages are sorted out.


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