According to data released Monday by the U.S. Census Bureau, June saw a drop in sales of newly constructed homes to their lowest level since April 2020's coronavirus pandemic.Annualized sales of single-family homes fell to 676,000 in June, 6.6% lower than May's rate at 724,000 and 19.4% lower than the June 2020 level at 839,000. Analysts expected new home sales to rise by 3.4% to 795,000 in June.Newly built homes are no longer affordable after a year of frenetic buying and price increases in the double digits.The June median price for a new home increased by just 6% compared to June 2020. This is a small gain in historical terms, but nothing when compared to the 15%-20% annual gains in previous months.Due to rising construction costs, most homebuying occurs at the upper end of the market. Builders cannot afford to build affordable homes.The price of softwood lumber spiked by more than 300% during pandemic. While it has dropped dramatically in the past month, it remains about 75% higher than its 2019 average. Other lumber products are significantly more expensive.Peter Boockvar (chief investment officer at Bleakley Advisory Group), stated that "we also know there are shortages in appliances, labor, and affordable lots." "The moderation of home sales is likely due to sticker shock and the slowdown of builders finishing homes due to a variety delays.From a May supply of 5.5 months to June's 6.3 month supply, the inventory of new homes for purchase jumped from a May supply of 5.5 months to June's supply. It was at its lowest point of 3.5 months last fall. The number of homes still for sale reached an all-time high in June.Zillow economist Matthew Speakman released the following: "Annual comparisons are going to get more difficult in the coming months as it was around this time last year when the market began soaring and reached highs not seen since the Great Recession."Mortgage rates rose by 25% in June for buyers who bought homes. Although it may not seem like much, buyers who are already financially stretched by rising home prices will be unable to absorb higher mortgage rates.Single-family housing starts are still on the rise, but not at the lowest end. Permits are not as strong as the market requires.Although there is still a strong buyer demand, many of the buyers are being constrained by supply and affordability issues. These signs were clearly visible at homebuilder sites in June, and they have played a role in the decline in homebuilder sentiment over the past two-months. Ivy Zelman, a noted builder analyst, stated this in a note last month.According to the release, "We are shifting the tone on the housing market basing on our analysis and proprietary data showing early signs a cooling down."
