The housing market has been a hot topic of discussion throughout the pandemic, and that’s definitely not about to change — last month, sales of newly-built homes were down 14% YoY as first-time homebuyers struggled to navigate market prices.
New home prices are high right now for two main reasons. First, the supply of existing homes has hit historic lows. Secondly, construction materials are expensive right now, so higher construction costs mean more expensive homes. In November, the median newly-built home price soared 19% YoY. As the supply of existing homes continues to dwindle and push up the prices of new properties, Chief Pantheon Economist Ian Shepherdson shared:
“A hefty correction appears to be due, but the rapid increases in existing home prices — inventory in that market is only one-third the level in the new home market, relative to sales — is putting extra upward pressure on new home prices.”
“Mortgage applications to purchase a newly built home were down just 2% in November from a year ago.” That implies that there are a lot of people interested in buying new homes, but they can’t make a deal work. That might be why existing home sales are the ones rising instead of new home sales.
Builders are feeling confident, maybe even bullish, that new monetary policy (rising interest rates) will put the spotlight back on building. However, general housing prices have been on the rise for 117 months (a/k/a nine straight years), so these prices can’t rise much higher.