Eye On Housing
After a slight slowing of sales at the end of 2020, new single-family home sales edged higher in January, increasing 4.3% to a 923,000 seasonally adjusted annual rate, according to estimates from the Census Bureau and HUD. Sales exceeded construction starts by a historic margin at the end of the summer, which necessitated an increase in starts and some slowing of sales at year’s end.
Overall, the January sales rate was 19.3% higher than a year ago, as housing demand continues to be supported by low interest rates, a renewed consumer focus on the importance of housing, and solid demand in lower-density markets like suburbs and exurbs. Housing affordability headwinds will increase in 2021, due to price growth and mortgage rates trending higher.
Looking back to the spring, the April data (570,000 annualized pace) marks the low point of sales for the 2020 recession. The April rate was 26% lower than the prior peak, pre-recession rate set in January. Sales then mounted a historic surge from April until July, outpacing gains in actual construction.
Sales-adjusted inventory levels remained lean in January, coming in at a 4 months’ supply. Inventory by count increased in January, but is 5.5% lower than a year ago. Moreover, the count of new homes offered for sale that have not started construction has increased 45% over the last year, rising from 56,000 to 81,000. The count of completed, ready-to-occupy homes stood at just 42,000 in January.
Housing affordability headwinds are rising for 2021, due to supply-side challenges such as elevated lumber costs and prospects for increased regulatory burdens associated with land development and building. The median sales price in January was $346,400, a 5.3% gain from a year earlier. Price discipline will be key for 2021 volume growth, given rising material costs.
Regionally, new home sales declined on a monthly basis 13.9% in the Northeast, and rose in the other three regions, up 12.6% in the Midwest, 3% in the South, and 6.8% in the West.
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