Buyers are hampered by soaring mortgage rates and exorbitant prices. Builders are hampered by shortages and the worst cost spike on record.
By Wolf Richter for WOLF STREET.
The stock of new single-family homes for sale stood at 407,000 homes in February (seasonally adjusted data), the largest unsold stock since August 2008, up 40% from a year ago. That’s 6.3 months of supply at the current rate of sales, according to Census Bureau data today.
A problematic mix. Homebuilders are facing historic cost spikes, and they are hampered by shortages of materials, supplies and labor that have stalled construction projects and prevented project completion. Potential buyers are hampered by soaring mortgage rates and prices that soared last year. It becomes a problematic mix.
Sales of new homes in February fell at a seasonally adjusted annual rate of 772,000 homes, down 6% year-over-year. Sales remain well below the boom years of 2002-2006.
New home sales are tracked when sales contracts are signed, not when deals are closed, unlike existing home sales, which are tracked when sales are actually closed. New home sales trends tend to be an early but volatile indicator of broader home sales.
The median price single-family homes sold, apparently hitting some sort of high last year, fell to $400,600 in February, down about 7% from the peak in November 2021 ($430,300), having now rebounded in the same range since July 2021 ($406,000).
That reduced the year-over-year gain to 10.7%, down from the year-over-year gains of 20% to 24% that raged last year through November.
Note the ridiculous price spike from June 2020 to July 2021, and how prices could have hit some sort of ceiling at the end of last year:
Construction costs single-family homes – excluding the cost of land and other non-construction costs — rose 17% year over year, the third straight month of 17% spikes, according to separate Census Bureau data today. These were the worst cost spikes in data dating back to 1964, amid all sorts of shortages and delays, and everyone able to pass on higher prices.
This graph shows the year-over-year increases in the cost of construction index for new single-family homes:
The chart below shows the actual index, along with the index values. Since June 2020, the index has jumped 24%. Note what happened during the Housing Bust: Between April 2007 and February 2012, the housing cost index fell by 11%:
Home builder stocks fainted at the news. Their share price is changing in the early afternoon today:
- R. Horton [DHI]: -4.3%
- Lennar [LEN]: -3.6%
- Pulte Group [PHM]: -3.2%
- NVRs [NVR]: -1.5%
- Taylor Morrison [TMHC]: -4.7%
- Meritage Homes [MTH]: -4.4%
- Knowledge base home [KBH]: -4.5%
- Century Communities [CCS]: -4.7%
- LGI houses [LGIH]: -7.8%
But sentiment towards homebuilders has deteriorated since December last year. The WOLF STREET homebuilder index, based on the combined market capitalization of the nine homebuilders above, fell 4% in the early afternoon today, is down 26% from the 52-week high from last December and is back where it first was in August. 2020:
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