WASHINGTON, D.C.: New home sales fell to a 14-month low in June, while sales in May were weaker than initially reported.
Officials said the lower sales were due to expensive lumber costs and shortages of other building materials.
Additionally, the U.S. Commerce Department reported on Monday that permits issued for planned homes dropped to a nine-month low in June. Higher production costs are resulting in builders pausing new construction, keeping building supplies tight and increasing home prices, to the detriment of first-time buyers.
"Home builders continue to hold back on contracts for new homes, given input costs and availability uncertainties, with significant uncertainty about what it will cost to build a house and when it can be delivered," said David Berson, chief economist at Nationwide in Columbus, Ohio. "Until builder costs and supply-chain problems become less of an impediment, it is hard to see new sales picking up significantly, in the near term."
New home sales were down 6.6 percent to an annual rate of 676,000 units last month, which was the lowest level since April 2020, the Commerce Department said on Monday.
Also, home sales in May were revised down to 724,000 units from 769,000 units.
Low mortgage rates have fueled demand for housing, along with the shift towards people working from home.
But supply has not kept up with demand, as builders must pass along soaring lumber prices and remain constrained by shortages of other building materials, household appliances, land and labor.
"It will probably take months for lower lumber prices to flow through to the price of new homes. Also, some of the recent decline in lumber prices has been reversed due to the impact of wildfires," said Nancy Vanden Houten, lead U.S. economist at Oxford Economics in New York, as quoted by Reuters.
The housing market had posted double-digit growth for three straight quarters during the pandemic. However, that streak came to an end during second quarter 2021.