So why such a big decline? Well, it can definitely be said that higher rates and home prices are having an impact, but a lot of the decline has to do with uncertainty as well. Normally, it takes 6 months to build a new home, but today it’s taking much longer. There is a lot of uncertainty about completion times. People normally do not make moving plans years in advance. With rates moving higher and fears of a recession looming, many will not feel comfortable purchasing a new home that is not completed and does not have a finish date set in stone.
There was a slight increase in inventory as well. Inventory of new homes on the market increased by 8.3% to 440,000 new homes for sale while the median new home price increased by 3.6% from $450,600 to $570,300.
While it does seem like home inventory is coming back, when you look slightly deeper, at the end of April only 38,000 or 6% of homes were actually completed. The rest were either not started or are currently under construction. As seen, the tight inventory picture isn’t getting better, but tight inventories in the current market dynamics are supportive of home pricing.
Source : http://bit.ly/2sq38xg
By: Jon Iacono