New construction costs and high mortgage rates decreased new home sales for February despite demand remaining solid given the lack of existing home inventory. The purchase of a new construction home is accounted for at any stage of the building process so long as a contract is signed or a deposit is accepted. The HUD (US Department of Housing and Urban Development) recently released data stating February saw a 2% decrease in sales of newly built single family homes and a 6.2% decrease in new home sales compared to last February.
With a 2% decrease in sales, new construction homes for February totaled at 772,000 seasonally adjusted units that are expected to sell in the next 12 months. Of those 772,000 units, 407,000 are available for immediate sale which is a 33% increase in new home inventory compared to last year. That’s an estimated 6.3 months supply of homes and just 35,000 of those homes are completed and considered move-in ready.
The building of new construction homes are expected to meet the current demand of buyers given the limited supply of existing homes on the market. This increased demand requires additional new construction and with the numbers showing a 20% increase in construction costs and a 15% increase in the median price of homes, the cost to build and buy these new homes significantly outpace inflation.