New home sales dropped to its lowest since pandemic

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The data released by the U.S. Census Bureau on Monday shows that sales of newly established homes dipped to its lowest level in June since the outbreak took place in April last year.

New single-family homes sales dropped to a yearly rate of 676, 000. This is 6.6% lower than the 724, 000 rate last May and 19.4 % lower than the 839, 000 in June 2020.

Newly created homes are hard to reach for much of the demand that is still in the market following a year of buying craze and price increase in double figures.

In June, the median price of newly built homes increased by only 6% from June of last year. It might be a huge gain but is still below the 15% to 20% yearly gains recorded in former months.

The majority of home buying is on the top end of the market and builders are not able to place affordable homes because of the expensive construction prices.

During the pandemic, there had been a 300 percent increase in softwood lumber cost. The price has dropped last month but it is still about 75% beyond the 2019 average, as some lumber products are skyrocketing prices.

“We also know there are shortages of appliances, labor and affordable lots,” Bleakley Advisory Group’s chief investment officer Peter Boockvar said. “The moderation in home sales is likely a combination of sticker shock and the slowdown in the ability of builders to finish homes because of a variety of delays.”

From a 5.5-month supply in May, the inventory of new homes for sale increased to a 6.3-month supply in June. It remained at a low of only 3.5 months last fall. The highest ever number of homes for sale that had not yet been started was also recorded last month, CNBC reported.

“Annual comparisons will get even more difficult in coming months, as it was this time last year that the market began to surge and reach highs not seen since before the Great Recession,” economist Matthew Speakman said in a release.