Sales of new single-family houses in January 2021 continued to increase according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. Experts say that's due to record-low mortgage rates and an acute shortage of existing houses on the market. The latter contributed to the simultaneous month-to-month decrease in pending home sales, which dropped 2.8% in January from December 2020 (but climbed one year prior), according to the National Association of Realtors (NAR).
“Pending home sales fell in January because there are simply not enough homes to match the demand on the market,” said Lawrence Yun, NAR’s Chief Economist. “That said, there has been an increase in permits and requests to build new homes.”
Danielle Hale, Realtor.com's Chief Economist, commenting on new home sales echoed Yun's take.
"Record-low mortgage rates kept buyer interest high and record-low numbers of existing homes for sale pushed many buyers to look to new construction," she said.
A total of 923,000 new homes sold in January, up 4.3% from December. Compared with a year ago, sales of new homes were 19.3% higher.
Hale continued: "While rents are falling in major tech hubs, rents are rising in some of the most affordable housing markets that have been homebuying hotspots, adding an extra push for aspiring homeowners to buy now. This is on top of the pandemic-fueled search for space as dwellers need more from their homes than ever before--space to work, learn, play and unwind," she said. "Going forward, housing demand is likely to face a test from mortgage rates which we expect to rise gradually in 2021. With large numbers of young buyers hitting prime first-time homebuying age, we expect demand to remain resilient and buyers to adjust their expectations and price point as they navigate a rising rate environment."
RCLCO Real Estate Advisors' Gregg Logan weighed in on new-home sales' strong 2021 start.
"While this is encouraging for 2021 overall, and our expectation is that this will be another strong year for the new housing market, we are concerned about how low inventories and rising prices will impact consumer’s ability to purchase, both from an availability and affordability perspective," he said. "Builders at the top-selling master-planned communities are quickly running through their lot allocations, lumber prices are high, and appliances are sometimes hard to obtain quickly, and all of this is stretching out the home purchasing process."
In short, he says, demand is strong, but he wonders whether the industry will be able to meet the demand.
Yun says the relationship between existing-home sales and pending home sales might not be in lockstep.
“The two measurements aren’t always perfectly correlated due to varying amounts of time required to close a contract,” Yun said. “This is because a number of fallouts can occur due to a variety of factors, including a buyer not obtaining mortgage financing, a problem with a home inspection, or an appraisal issue.”