While the credit industry and residential property sales continue to shine amid a pandemic-hit economy, already tight inventory could hold back future growth.
New home sales grew 8.3% annually in August. However, this was offset by a 4.1% decline in new buildings, according to Redfin. These rates assumed gains of 13.5% and 3.8% respectively in July.
In comparison, existing property sales grew 10.5% year-over-year, with these listings increasing 5.2%. Buying peaks – driven by consumers who are looking for more space or want to secure low interest rates – take the bite out of the shrinking housing supply.
"There is a huge demand for new homes, but home builders face unique and costly hurdles in trying to meet that demand," Redfin chief economist Daryl Fairweather said in the report. "The listing of new houses is not recovering as quickly as the listing of existing houses, as construction companies, unlike individual homeowners, have faced timber and labor shortages during the pandemic. They also compete with people for work and material renovation of their houses during quarantine The lack of new offers prevents home builders from realizing their full potential for home sales growth. "
The supply of newly built houses fell by 33.6% annually, coupled with a decline in existing properties by 38.3%. This is the biggest year-over-year decrease for both sectors since Redfin started tracking in 2013.
Of course, increased demand in lockstep with reduced supply leads to price growth. Median sales prices for new homes rose 4.1% annually to $ 378,000 in August. Meanwhile, existing home prices rose 12.1% to $ 316,000. These rates overshadowed both July’s annual growth rates of 2.3% for new homes and 9.3% for existing homes.
In order for the building to quench and quench a thirsty market, the builders have to grapple with the double-edged sword of current conditions.
"Historical traffic figures have builders seeing positive market conditions, but many in the industry are concerned about rising costs and delays in building materials, especially lumber," said Chuck Fowke, chairman of the NAHB. "In order to avoid a slowdown in the market in the coming months, more domestic timber production or tariff relief is necessary."