US new home prices are growing at the fastest rate in well over a generation. US Commerce Department data shows the median price of a new single-family home nearly reached the all-time high in April. The real story is the rate of annual price growth though, which hasn’t advanced this quickly in over 30 years.
US New Home Prices Rise Over 20% From Last Year
The price of a new single-family home made a big jump last month. The median sold price hit US$372,400 in April, up 11.43% ($38,200) from the month before. Compared to the same month last year, this number is 20.09% ($62,300) higher. The median sold price is just under the all-time high reached in January.
US Median Sale Price For New HomesThe median sale price of a new single-family home in the United States. Source: US Census; HUD; Better Dwelling.
US New Home Prices Rise At The Fastest Rate Since 1988
The monthly price advance was huge, at nearly half the median annual household income. The median price increase in April alone was about two-thirds of the annual increase. As for the annual rate of growth, it was the largest since 1988 — over 33 years ago. It’s a monster rate of growth, and nothing like this has been seen in over a generation. At least not at the national level, and for new home prices.
US Median Sale Price Change For New HomesThe annual percent change in the median sale price of a new single-family home in the United States. Source: US Census; HUD; Better Dwelling.
Building Materials Slow Driving New Home Costs Higher
Developers may not be cashing in the huge gains you may expect though. The cost of building materials and labor has soared since last year. This is part of the reason why prices have increased so much, and may continue as commodities rise.
For example, Lumber prices jumped so fast, just the increase adds ~$30,000 to the cost of building a new home. That works out to almost half of the annual price increase for the median home sold last month. Factor in the increase for other commodity prices, and the labor squeeze from the building boom. Developers are still making more cash, but a good chunk of gains are covering materials.
High flying home prices may be getting close to pushing their limits. Last month, home sales also saw a sharp decline in volume, partially attributed to prices. As prices continue to rise, fewer qualified buyers exist. It’s going to take a few months of demand tapering to cool rising builder costs though.
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