Housing Figures: Newly Built Homes Take Bigger Share of For-Sale Market

Housing Figures is our monthly round-up of the top news stories related to residential new construction spending and the latest market numbers.  

While the residential new construction industry watches out for lumber price relief, new home sales jumped in March and the first quarter of the year saw a record high share of newly built homes for sale among all single-family homes on the market. Meanwhile, the majority of home builders have yet to report an impact in either direction from fluctuations in mortgage rates as sales and traffic remain strong.  

Lumber continues to lead the conversation 

Lumber now adding $36,000 to the price of new homes. Lumber prices have tripled over the past year, leading to the cost of the average new single-family house to go up by $35,872 according to the National Association of Home Builders. The price increase has also increased the market value of an average new multifamily home by about $13,000, which equates to about $119 per month more in rent. [NAHB Now] 

But NAHB is working on lumber price solutions. To ease the pressure of the rising costs of lumber, NAHB has been working with the White House to find a solution. The association said recent talks were “productive” and covered mill capacity issues and mill worker shortages, as well as how lumber prices are impacting housing affordability. The association has asked the White House to convene stakeholders for a summit on lumber and supply chain concerns. They’ve also asked that the 9 percent tariffs on Canadian lumber be temporarily removed. [HBS Dealer]  

New home sales at highest pace since 2006 

New home sales experience jump in March. Sales of news home rose 20.7 percent in March to a seasonally adjusted annual rate of 1.02 million — the highest sales pace since September 2006. Low interest rates and robust demand helped to push the increase, even as builders continue to struggle with building costs. Meanwhile, inventory fell to a supply of 3.6 months, which is 44.6 percent lower than this time last year. The median sales price for March was $330,800, an increase from $328,200 in March 2020. [LBM Journal] 

Zonda’s new home pending sales index drops month-over-month. Zonda’s New Home PSI came in at 158.2 for March, which represents a 6.1 percent drop from the prior month, but a 50 percent increase from March 2020. Notably, March 2020 was particularly weak as people coped with the start of the pandemic. Seattle was the only market out of 25 top markets that saw a year-over-year drop in sales, decreasing by 11.9 percent. Denver, Philadelphia and Raleigh, North Carolina, lead the way in year-over-year sales increases. [Builder] 

Newly built single homes are taking up a bigger piece of the pie. Newly built single-family homes made up 25.7 percent of all single-family homes for sale in the first quarter of 2021. That percentage is up 20.4 percent from 2020 and is now the highest share on record. While new homes have seen an increasingly higher share among all for-sale single-family homes over the past decade, the pandemic has caused a notable acceleration, providing a huge opportunity for residential new construction builders. Low mortgage rates and high demand have made home building a very attractive option. [Redfin] 

Pending home sales up again 

Index for pending home sales rebounds in March. The National Association of Realtors reported that pending home sales rose 1.9 percent in March after two months of declines. Their index measures pending sales on existing homes. March’s pending sales were up 23 percent from March 2020. The largest regional increase occurred in the Northeast, while sales fell in the Midwest. Both the West and South saw increases as well. As noted, the demand is here but inventory is presenting an issue. [Realtor.com] 

First quarter growth for luxury home sales. The sales of luxury homes rose 41.6 percent year-over-year in the first quarter of 2021. That figure outpaced sales growth in every other segment. For example, affordable home sales increased seven percent while mid-priced homes increased 5.9 percent. According to Redfin’s analysis, the 49 most populous metros experienced luxury home sales growth in the first quarter as the luxury segment is experiencing a less severe inventory shortage than other segments. [Redfin] 

Multifamily in the works 

Issued multifamily permits increase in February. Multifamily permits grew in February compared to year-over-year data with an overall rise of 17.7 percent. Regionally, that breaks down to a 22 percent increase in the West, an 18.4 percent increase in the South, a 17.5 percent increase in the Northeast and a more modest 5.4 percent increase in the Midwest. New Mexico saw a particularly sharp increase of 714.3 percent. From February 2020 YTD to February 2021 YTD, permits in the state grew from 42 to 342. [NAHB Now]