House hunters looking to buy a newly constructed home are likely to face slim pickings this spring.
Construction companies built only 70,000 new homes nationwide in April, according to the Federal Reserve Bank of St. Louis. Even though that’s more than double what builders had completed a year ago, it doesn’t come anywhere close to meeting the shortfall of 6.5 million single-family units facing Americans today.
The shortage comes at a time when the U.S. finds itself in a housing crunch, with many homeowners opting not to put property on the market for fear of having to mortgage another house at a higher interest rate. The trend has contributed to a depletion of existing homes available for potential buyers.
“A lack of existing inventory supported sales of newly built, single-family homes in April,” Alicia Huey, chairman of the National Association of Home Builders (NAHB) and a custom home builder in Alabama said in a statement this week. “Even more encouraging, we are seeing sales growth in the more affordable price ranges of $200,000 to $400,000.”
The median sales price for new homes hit $420,800 in April, according to Fed data.
The number of new homes completed hit a peak in 2007, when builders pumped out more than a whopping 170,000 units each month, according to the Fed. That figure has steadily declined over the past decade or so to about 70,000 units or less every month this year.
The reason for the drop in new home completions is a shortage in skilled construction workers and supply-chain issues, the NAHB said. Builders are having troubles getting distribution transformers — a piece of electrical equipment that sends power from a utility line to the home.
Fewer houses on the market this year has led to a drop in sales, economists said. Pending home sales fell 20% in April compared to a year prior, the National Association of Realtors (NAR) reported. And while that isn’t the only reason for the dip, it’s a pivotal factor.
“Affordability challenges certainly remain and continue to hold back contract signings,” NAR Chief Economist Lawrence Yun said Thursday. “But a sizable increase in housing inventory will be critical to get more Americans moving.”