Builders Throttling Sales and Higher Mortgage Rates Hit February Sales
2022 Off to a Slow Start Thanks to Supply Setbacks
- New home sales fell 2.0% in February to a 772,000 unit pace. The decline follows an 8.4% pullback in February.
- The major issues holding back home sales are on the supply side. Building material and labor shortages have led to uncertain completion times, which have forced most builders to limit sales to allow projects to catch up.
- Despite the drop in overall sales, sales of new homes which have not been started rose to 209,000 units during the month, reflecting a growing backlog for builders.
- The number of homes for sale rose to 407,000 in February from 398,000 the month prior. However, almost all of that increase occurred in homes which have yet to start construction.
- The lack of supply, as well as rising building material and labor costs, are pushing up the price of a new home. The median price of a new home was $400,600 in February, up 10.7% over the past year.
- Sales in the West slipped 13.0%, while sales in the South edged down 1.7%. Meanwhile, sales in the Northeast and Midwest rose 59.3% and 6.3%, respectively.
- Higher borrowing costs are sure to test home sales in coming months. According to Freddie Mac, average 30-year mortgage rates rose above 4% for the first time since May 2019 during the week of March 17th. More recently, rates have spiked even higher, with daily rates reaching 4.72% on March 22nd, according to Mortgage News Daily.