Weak affordability has been the biggest problem in the new home market, as builders have largely focused on move-up homes rather than cheaper entry-level products. The median price of a new home sold in January was down nearly 4 percent annually, according to the U.S. Census. That was not necessarily because builders were lowering prices, but because a larger share of entry-level homes sold that month. Sales in January fell to a three-month low.
“More builders are saying that lower price points are selling well, and this was reflected in the government’s new home sales report released last week,” said Robert Dietz, NAHB’s chief economist. “Increased inventory of affordably priced homes — in markets where government policies support such construction — will enable more entry-level buyers to enter the market.”
Builders say they continued to have trouble building lower-priced homes, however, due to shortages of skilled labor and buildable lots.
Of the index’s three components, sales expectations in the next six months rose 3 points over the past month to 71, current sales conditions increased 2 points to 68, and traffic of prospective buyers fell 4 points to 44. Buyer traffic has been in negative territory for several months.
Looking at three-month moving averages, builder sentiment in the Northeast rose 5 points to 48, the South was up 3 points to 66 and the West increased 2 points to 69. Sentiment in the Midwest fell 1 point to 51.
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