Overall sales for new homes in the United States have hit a new 14-month low in June, according to new data released by the Commerce Department. New home sales have declined for three months now, mainly because of lumber and material shortages that have gripped the nation. Prices have skyrocketed because of these shortages, as well as because of other issues such as global supply chain problems, which have driven homeowners away from purchasing a new home.
According to the Commerce Department’s latest report, new home sales fell about 6.6% to an adjusted annual rate of 676,000 units, the lowest level recorded since April 2020. This decrease is somewhat of a surprise, as many economists forecasted that rates would increase slightly by about 3% (rather than decrease). However, homebuilders have continued to deal with material shortages and global supply chain issues, all of which have hampered the industry.
For more than a year now, the housing market has been booming, even throughout the COVID-19 pandemic. Now that homebuilders are dealing with lumber and material shortages, however, things have changed. Builders have recently had to raise prices because of these shortages, which has driven many potential customers away. As a result, many builders are scaling back, holding back on contracts, and keeping supply tight.
This is happening because there’s still a lot of uncertainty about the future for homebuilders. When will the lumber shortage officially end? When will the huge global supply chain issue straighten out? To keep things in order, many have decided to hold back on signing contracts, as they simply don’t have a timetable as to when they will be able to fully build a house and deliver it. As a result, many economists aren’t sure when new home sales will pick up again.
However, there is still a huge demand for housing, even after a year of home sales. Many Americans are looking for new homes as a result of low mortgage rates, fiscal policies, and the fact that many are still working from home, or taking online classes. The need for change or a bigger home has, therefore, been a common desire for many families in the U.S. There is currently a backlog of new homes that have been approved for construction, though they haven’t been started yet. This backlog surged this past June, reaching the highest level since October 2006.
The price of lumber actually did drop a bit this summer, though it quickly shot back up again because of the wildfires throughout the United States and Canada. Many economists now forecast that it will take another few months for lumber prices to lower again. Wildfires will more than likely continue into the late summer, which will only continue to drive lumber prices up. However, towards the end of the year, there is the hope that lumber will lower in price finally.
Meanwhile, while many officials in the U.S. and worldwide are attempting to help solve the global supply chain issues, this may be another problem that will take months to sort out.