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Although the demand for new homes remains strong, many builders are limiting sales to catch up on building the houses they already have promised, The Wall Street Journal reported.
Low interest rates, the desire to escape cities during the COVID War, and newfound freedom to work from home has pushed home sales to record rates late last year and early in 2021, the WSJ noted.
The boom has led builders to run short of materials, labor, and available land to build on. (See “Home Prices Up, Commodities Costs Soar,” Trends Journal, 23 March 2021.)
“To have someone walk into our models and to tell them, ‘We don’t have a house for you to buy today’ is foreign to us,” CEO David Auld of builder D.R. Horton told the WSJ.
“We’re managing through a market that none of us have ever seen,” he said, adding that Horton’s sales slid 17 percent in this year’s second quarter compared to a year earlier, due to a combination of shortages and the company’s decision to not over-commit itself.
Some buyers are still selling on a first-come, first-served basis, while others are holding lotteries among interested buyers, the WSJ said.
Continuing housing shortages are likely to push prices beyond the record median of $363,300 set in July, according to the WSJ; the website Realtor.com has reported a median price for the month of $385,000. (See “Home Sales, Prices Still Rising,” Trends Journal, 27 July 2021.)
“Because builders are deliberately not selling, it’s creating a lot of pricing power,” Alan Ratner, a director at advisory firm Zelman & Associates, said to the WSJ.
TREND FORECAST: The construction industry will continue to be burdened by shortages of materials and available land, and high prices for items that are available, keeping home prices at a premium until equity markets and the economies crash.
As the National Association of Home Builders Chairman Chuck Fowke said to CNBC today, “Some prospective buyers are experiencing sticker shock due to higher construction costs.”
And the NAHB chief economist, Robert Dietz chimed in with a warning that “While the demographics and interest for home buying remain solid, higher costs and material access issues have resulted in lower levels of home building and even put a hold on some new home sales.”