Along with a growing supply of housing inventory to meet the massive demand, the boom in home sales appears to be slowing down as rising real estate prices — some, up by double digits — make new homes unaffordable for many people.
Based on the frenzied buying and price gains of the past year, analysts were expecting new home sales to increase by 3.4 percent in June, CNBC reported. Instead, sales of newly built homes fell by 6.6 percent from May to June — the lowest level since April 2020, according to data released Monday by the U.S. Census Bureau.
The median price of a newly built home in June increased 6 percent from June 2020, and while that is a large gain, it is small compared with the 15-to-20-percent annual gains seen in previous months. Inventory of new homes for sale spiked from a 5.5-month supply in May to a 6.3-month supply in June.
With inflation and the skyrocketing price of building supplies such as lumber, builders can’t afford to put up affordable homes, according to CNBC. Most of the home buying is on the higher end of the market.
“We also know there are shortages of appliances, labor and affordable lots,” said Peter Boockvar, chief investment officer at the Bleakley Advisory Group. “The moderation in home sales is likely a combination of sticker shock and the slowdown in the ability of builders to finish homes because of a variety of delays.”
Buyers also faced higher mortgage rates in June, which rose about a quarter of a percentage point. Already stretched by higher home prices, buyers had less of a financial cushion to absorb higher mortgage rates.
“We are shifting our tone on the housing market based on our analysis of proprietary data showing early signs of a cool down,” builder analyst Ivy Zelman wrote in a note.
Black people have been among the hardest hit during the covid-19 pandemic. Research shows that layoffs were more likely to cause housing instability among Black workers than white, Marketwatch reported.
Many Black Americans didn’t have enough savings or financial safety net to weather the economic disruption of covid-19, which hindered their progress towards buying a home.
The Black homeownership rate, which has been decreasing since 2000, has never reached 50 percent and has historically lagged behind white homeownership by 20-to-30 percent. By the second quarter of 2019, Black homeownership had fallen 7 percent over the previous 10 years to 40.6 percent. The Black homeownership rate is now up to about 44 percent vs. 74 percent for whites.
Owning a home is one of the main drivers of intergenerational wealth in the U.S. The NCRC (National Community Reinvestment Coalition) works to end discrimination in lending, housing and business by increasing the flow of private capital into traditionally underserved communities.
A new report from the NCRC calls for setting a goal of 60 percent Black homeownership over the next 20 years.
“Not only has the financial insecurity of Black Americans hindered their progress towards buying a home, now it’s even worse,” said Joshua Devine, NCRC director of racial economic equality, in a March 2021 Marketwatch interview. “Recovery has to center and respond to the decades of financial insecurity that Black Americans have faced pre-covid.”
Dedrick Asante-Muhammad, chief of race, wealth and community at the NCRC, said he’s concerned that the covid recession will set Black homeownership back even further.
“We think it’s pretty clear it’s disproportionately hurting Black entrepreneurs and that could have a serious effect on homeownership,” Asante-Muhammad said. “Oftentimes Blacks and Latinos hit the worst of a crisis after the crisis is supposedly over. We had the worst of the Great Recession a couple years after the Great Recession was already declared over. I think that could also be true with the covid recession. We might by July say it was over, but the Blacks and Latinos might be still dealing with the worst aspects of it in 2021, 2022 and 2023.”
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