Sales of new single-family homes fell sharply in February, as brutally cold weather and the skyrocketing price of lumber left homebuilders struggling to complete projects and buyers lacking affordable options.
New single-family home sales dropped to an annualized rate of 775,000, 18.2% lower than in January and well short of the 875,000 economists had expected, according to a poll cited by Moody’s Analytics. It wasn’t all bad news for home sellers, however, as new homes actually sold slightly faster than they did in January, staying on the market an average of 3.2 months instead of 3.3, according to the Census Bureau data released Tuesday.
While the real estate market has been booming despite the general economic downturn of the pandemic period, gravity finally caught up in February, with sales of existing homes falling 6.6% and new ones taking a downright nosedive in the largest monthly drop over the past year.
Supply shortages and skyrocketing material costs are partly to blame, leaving homebuilders short on cabinets, molding, and even workers, according to Mark Vitner, a senior economist at Wells Fargo Securities. The shortages have left builders struggling to finish projects and buyers with a depleted inventory to choose from, especially among lower-priced homes, he said.
Sales were still 8.2% above the pre-pandemic level set in February 2020. And 46% of the decline came from the South census region, which was devastated by an ice storm around Valentine's Day.)
While the supply chain issues are a “wild card,” Vintner predicted the market would rebound from February’s slump thanks to the tailwinds provided by an overall economic rebound.
“We should see some relief this spring, as COVID cases subside further and vaccinations continue to ramp up,” Vittner said.