Prices of new US homes hit record high as sales fall unexpectedly

Sales of new single-family homes in the United States fell last month while prices continued to spike to record highs, with eager house hunters vying to become homeowners in a seller’s market.

Sales of newly constructed single-family homes declined 5.9 percent from April’s revised level, the US Department of Commerce said on Wednesday, with 769,000 new homes sold.

May’s fall-off came as a surprise and marks the second straight monthly decline.

But thanks to a shortage of supply that’s been exacerbated by soaring raw material costs, prices of newly built homes continued to climb, with the median price of a home sold hitting $374,400 last month, shattering the previous record.

“The biggest limitation on new home sales this year will be the shortage of homes for sale,” Sam Hall, assistant property economist at Capital Economics, wrote in a note to clients on Wednesday. “The good news for homebuilders is that construction costs look to be easing, with lumber prices now down almost 50% from their record highs in May.”

It’s not just new home sales that are falling while prices are rising. Existing home sales declined for a fourth consecutive month in May, the National Association of Realtors said on Tuesday, while the median selling price of a previously owned home crossed $350,000 for the first time ever.

Rising home prices are symptomatic of a wider issue for the US economy, namely how the fallout from the coronavirus pandemic has widened pre-existing wealth and income gaps.

House hunters who kept working during the pandemic and saw their wealth increase from a rising stock market have amassed healthy down payments for a home. Near-zero interest rates designed to help millions of jobless Americans by shoring up the nation’s labour market have also led to historically low mortgage rates that aspiring homeowners are keen to lock in.

That has put sellers in the driver’s seat as eager home buyers vie for what is available. But that imbalance of power has also kept some would-be buyers on the sidelines, waiting for some of the heat to come off of the nation’s red-hot housing market.