Steel Markets

Construction Costs, Inventory Shortage Slow Home Sales in April

May 25, 2021

New home sales sank 5.9% in April from downward revised data in March to a seasonally adjusted annual rate of 863,000, according to estimates by the U.S. Census Bureau and Dept. of Housing and Urban Development. Other than a weather-related dip in February, April’s annual rate was the lowest since June 2020.

A new home shortage was blamed for fewer sales in what is considered a “hot” housing market. Inventory of available single-family homes was estimated to be 316,000 at the end of April, representing a supply of 4.4 months at the current sales rate. Completed homes, ready for move-in, represented only 11% of April’s inventory.

The median sales price rose 20% from a year ago to $372,400 and the average sales price to $435,400, said the government report.

“Higher costs have priced out buyers, particularly at the lower end of the market,” said Robert Dietz, chief economist at the National Association of Home Builders. “A year ago, 45% of new home sales were priced below $300,000. In April 2021, only 27% of new home sales were priced below $300,000.”

Lumber Costs Soar Under Supply Shortages and Import Tariffs

Costs for lumber, steel and other building materials have soared in 2021, impacting construction and home prices. Construction starts for new single-family homes fell 13.4% in April, said NAHB. Lumber prices, up nearly 300% from a year ago, have added nearly $36,000 to the price of a new home, said NAHB Chairman Chuck Fowke. He added that the situation will only become worse if the administration goes through with doubling the tariffs on Canadian lumber to 18.32%.

“Affordability factors are clearly affecting new home sales,” said Fowke. “A growing number of builders are limiting sales in order to manage supply chains, including access and cost factors associated with lumber, appliances and other building materials. Policymakers need to find ways to improve the supply chain by facilitating more domestic production, or in cases where that cannot be done, suspending tariffs to allow for more imports.”