Housing Figures: New Home Sales Increase Amidst Cost Concerns
March 4, 2021
Housing Figures is our monthly round-up of the top news stories related to residential new construction spending and the latest market numbers.
2021 has started off strong for the housing industry — from new home sales to building permit authorizations, and builders are remaining confident. Still, there are ongoing concerns for material prices and supply chain availability.
Housing starts down, but permits up
Starts were down in January but building permits surged ahead. Housing starts were down six percent in January from December’s revised rate and were 2.3 percent below January 2020’s rate. However, building permits were 10.4 percent above December’s rate and 22.5 percent above January 2020’s rate. In real numbers, that comes to 1.58 million housing starts in January and 1.881 million building permits. The number of houses completed came in at 1.336 million. [Census Bureau]
New home sales also up
The New Home Pending Sales Index showed double digit increase year-over-year. Zonda’s New Home Pending Sales Index was up 28.1 percent year-over-year in January. The top markets included Jacksonville, Florida, Austin, Texas, and Raleigh, North Carolina. Jacksonville saw a 45.8 percent increase year-over-year. The numbers indicate the spring selling season has started early. [Builder]
Single-family new home sales were up in January. The sale of new single-family houses rose 4.3 percent in January from December and 19.3 percent from January 2020’s estimate. In January, new home sales were at a seasonally adjusted annual rate of 923,000 units. The median sales price came in at $346,400, while the seasonally-adjusted estimate of new houses for sale at the end of the month was 307,000. That represents a supply of four months. [Census Bureau]
Despite high lumber prices, new home sales beat expectations. Mortgage rates had a bigger impact on new home sales than high lumber prices in January, with sales beating expectations. The low month supply of homes is also contributing to home builder confidence, more on that below, despite the spike in lumber prices. [HousingWire]
The overall market is still hot
Winter hasn’t cooled the housing market. Zillow economists are predicting that 2021 will see seven million home sales, up 25 percent from 2020. In January, the typical U.S. home was worth 9.1 percent more than in January 2020, which represents the fastest annual pace recorded by the Zillow Home Value Index since June 2006. [Zillow]
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Costs continue to be a challenge
Builders are concerned about material prices in 2021. A recent survey by the National Association of Home Builders showed that roughly nine out of 10 builders are expecting building materials prices to be their top challenge this year. A significant percentage also continues to be concerned about the availability of and time it takes to obtain building materials followed by the cost and availability of labor. [NAHB Now]
Home prices go up (but not everywhere)
To finish the year, home prices increased by a double-digit rate. The S&P CoreLogic Case-Shiller Home Price Index came in at 10.4 percent year-over-year in December 2020. That represented the first double-digit increase since January 2014. The month-to-month index also increased 0.85 percent, which showed the strongest November-to-December increase since the data series began. [CoreLogic]
Still, some markets are seeing home price decreases. Though home prices are up in most markets across the country, realtor.com analyzed a few places where prices are actually falling. These markets include Destin, Florida (down 15.6 percent in median list price change), Honolulu, Hawaii (down 12.2 percent) and Bloomington, Illinois (down 8.3 percent). Erie, Pennsylvania, Shreveport, Louisiana, and Terre Haute, Indiana, also made the list. [Realtor.com]
Home builder confidence remains
High demand offset higher costs for builders. Strong buyer demand propelled builder confidence in February, despite supply chain issues and lumber price surges. The latest NAHB/Wells Fargo Housing Market Index rose one point to 84 overall. Low mortgage rates and a shift to lower cost suburban markets are keeping demand in good condition, but NAHB’s Chief Economist Robert Dietz suggests there could be some cooling going forward due to costs, supply chain issues and regulatory risks. [NAHB Now]
Builders report sales bounce-back and record pricing power. Our latest State of the Industry Report, which pulls the perspectives of small- to-mid-sized home builders, indicated sales and traffic bounced back in January after some deceleration at the end of 2020. In some cases, builders even reported slowing down sales thanks to extensive backlogs. There was also a survey record high for the number of builders who reported raising home prices. [HomeSphere]