Builders pull back as more homebuyers are priced out of the market

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Builders pull back as more homebuyers are priced out of the market. DianaOlick reports.

The median price of a newly built home in May was up 18% compared with May 2020.

Residential single family homes construction by KB Home are shown under construction in the community of Valley Center, California, U.S. June 3, 2021.There are several signs in the market for newly built homes that point to a potential slowdown for the nation's homebuilders.Single family housing starts continued to rise in June, many of those for homes already sold.

"The single family market in particular desperately needs more new homes, especially on the lower end where first-time home buyers need some price relief and more supply choices, but we also know that it is getting more and more difficult to deliver from a builder perspective at the wanted price points," said Peter Boockvar, chief investment officer at Bleakley Advisory Group.

Elsewhere in the market, mortgage applications to purchase a newly built home dropped nearly 24% in June year over year, according to the Mortgage Bankers Association. That was the third consecutive month of decline. "Homebuilders are encountering stronger headwinds of late, as severe price increases for key building materials, rising regulatory costs, and labor shortages impact their ability to raise production. This has dampened new home sales and quickened home-price growth," said Joel Kan, an MBA economist.

 

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