New housing data from the Commerce Department reveals that new home sales increased in July, though overall housing market activity appears to be slowing down amid consistent material and supply shortages. For three months, new home sales decreased; July marks the first month that an increase was seen.
Data from the Commerce Department also reveals a surge in new housing inventory in July, though this surge was mainly driven by an increase in homes that haven’t yet been built. The housing market has been hit by raw material and supply shortages, forcing many homebuilders to halt production as they wait for supplies to arrive. Lumber shortages have mainly affected homebuilders, though different material shortages have also impacted homebuilding businesses.
Much like other industries in the United States, these shortages have slowed down activity for homebuilders. So, while an increase in home sales has occurred last month, many of these houses haven’t even been built, or the process of building the homes hasn’t started yet.
Elsewhere in this new report from the Commerce Department, there are signs that the housing market is slowing down. This is for many reasons. Currently, there aren’t a lot of previously owned homes that are being put up for sale. As many Americans are looking to buy homes, this has caused new home sales to increase — and a huge demand for housing in many areas of the nation. This has also resulted in a surge in prices, which has unfortunately shut out many first time home buyers.
The surge in housing has also occurred because of the huge material shortages affecting homebuilders. Lumber and other raw materials needed to build homes has surged in price. Naturally, the overall price of homes followed suit.
Housing activity may be slowing down as a result of the low amount of housing for many in certain areas. Homebuilders are taking much longer to complete houses than normal, mainly because it is taking a long time to get the materials that they need. Global supply chain issues are also complicating matters, as some businesses are being forced to wait months before they finally get the materials or supplies they ordered.
Labor shortages have also hindered homebuilders. Labor shortages have gripped the country for months now. While hiring has slowly increased with each new month, the Delta variant — which has resulted in COVID-19 cases surging around the world — may complicate matters. Scarce land to build on has also affected homebuilders and may continue to.
Therefore, the consumer demand for housing is still there and will continue to be, but the ability for this demand to be met is not. As a result, there are already signs that this will cause housing market activity to slow down. As homebuilders don’t want to face a backlog of sales, they may keep the amount of homes they plan to build to a minimum.
Meanwhile, previously owned home sales also increased slightly in July. If more previously owned homes are put up for sale in the coming months, there may be an ease to the overall demand. However, it doesn’t appear that the mass demand will be met anytime soon.