High Home Prices Dent Housing Sales – June 28, 2021

The pandemic has generated economic distortions throughout the economy, and housing is no exception. After sales briefly fell during last year’s lockdown, sales surged and peaked in January, as illustrated in Figure 1.

Sales of existing homes have followed a similar pattern, according to data from the National Association of Realtors (NAR).

But the jump in sales has eaten away at scarce inventories, and bidding wars have erupted in various locations. Furthermore, high lumber prices have held back homebuilding, contributing to rising prices for the limited number of houses available.

We see it in the price of new homes, which hit a record high in May and are up 18% versus one year ago–see Figure 2.

While sellers celebrate the jump in prices, it has been a tough market for buyers, especially first-time buyers. Not surprisingly, high prices are starting to affect sales.

Sales are off the peak but remain elevated. NAR data suggest inventories remain very low, which is supportive of prices.

Created 2021-06-28 14:11:10