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ArlingtonReal EstateBuyers of new homes try to beat interest-rate hikes

Buyers of new homes try to beat interest-rate hikes

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After posting four consecutive monthly declines on rising mortgage rates and worsening affordability conditions, new-home sales posted a solid gain in May as some buyers rushed into the market in advance of the Federal Reserve’s June interest-rate hike.

Sales of newly built, single-family homes in May increased 10.7 percent to a 696,000 seasonally adjusted annual rate, according to newly released data by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

New-home sales are down 10.6 percent in 2022 on a year-to-date basis.
“Though new-home sales registered a solid increase in May, we expect sales to decline in June following the Fed’s action to significantly raise interest rates in an effort to cool the economy and ease inflation,” said Jerry Konter, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Savannah, Ga.

“High construction costs and rising mortgage rates are pricing many buyers out of the market,” Konter said. “Only 10 percent of new homes were priced below $300,000 in May, compared to 23 percent a year ago.”

A “new-home sale” occurs when a sales contract is signed or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the May reading of 696,000 units is the number of homes that would sell if this pace continued for the next 12 months.

New single-family home inventory remained elevated at a 7.7-months’ supply, up 42.6 percent over last year, with 444,000 available for sale. However, only 8.3 percent of new-home inventory is completed and ready to occupy. The remaining have not started construction (25.9%) or are currently under construction.

The median sales price dipped to $449,000 in May from $454,700 in April but is up 15 percent compared to a year ago, due primarily to higher construction and development costs, including materials.

Regionally, on a year-to-date basis, new-home sales fell in all four regions, down 3.8 percent in the Northeast, 21.7 percent in the Midwest, 12.3 percent in the South and 2.2 percent in the West.

The National Association of Home Builders has expressed frustration at the Biden administration’s decision not to cut tariffs on Canadian lumber to help offset other increases in new-home costs.

“NAHB is extremely disappointed that the Biden administration is turning a blind eye to America’s housing-affordability crisis by refusing to eliminate tariffs on Canadian lumber at the same time it is considering rescinding tariffs on a wide range of Chinese goods to curb inflation,” Konter said in a statement. “Tariffs act as a tax on American consumers, and the lumber tariff is particularly onerous.”

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