USA TODAY International Edition
Why is it harder to find a new home?
Smaller supply isn’t the only factor chilling sales this year
USA TODAY
The economy’s growing, companies are hiring and 401(k)s are fatter than last year.
So what’s holding people back from fulfilling the American dream of buying a new home?
Blame a brutal cold snap and higher prices.
Sales of newly built houses fell 7.8% in January, the second straight monthly decline, the Commerce Department said Monday.
Some economists say the drop was just a blip, but others cite factors that may be putting a damper on buyers’ aspirations.
Here’s why it was tougher to get a new home at the beginning of 2018:
Weather
Harsh weather put a chill on buyers, especially in the Northeast and South, where sales plunged like the mercury, down 33.3% and 14.2%, respectively. Milder weather drew out buyers in the Midwest and West, where sales rose.
Worker shortages
Home prices are up overall from this time last year. Why? Supply and demand. About 1.5 million construction workers left the industry during and after the housing crash, and only about half came back. That means the ones who are left are pushing up wages and housing costs. Nationally, the median price of a new home was $323,000 in January, 2.5% above the cost a year ago.
Materials are pricier
They rose 3% last year, and Oldcastle, a building materials company, expects a similar jump in 2018 — another force nudging up prices.
Higher prices
The story for both new and existing homes is similar. Low supplies are driving up prices, and that’s putting a damper on sales in some markets. Existing house prices across the country rose 6.3% annually in December, the fastest pace in 31⁄2 years, according to the S&P CoreLogic Case-Shiller national home price index.
Seattle led, with a 12.7% gain from a year ago, followed by a Las Vegas, with an 11.1% increase, and San Francisco, with a 9.2% rise.
“The rising home prices should be causing the same nervous wonder aimed at the stock market after its recent bout of volatility,” said David Blitzer, managing director of S&P Dow Jones indices.
Dwindling space
It’s tough to find land to build a new home, especially in big metro areas that have toughened zoning laws to curb excessive traffic and environmental impacts. Again, fewer homes lead to higher prices.
Higher mortgage rates
Average 30-year fixed mortgage rates have climbed from about 3.8% in September to 4.4% recently, according to Freddie Mac.
Tax law changes
The new tax law caps the mortgage interest deduction at home values up to $750,000, down from $1 million, for homes bought after Dec. 15. It also limits the deduction for property and state and local income taxes at $10,000. The modified mortgage interest deduction may have pulled forward some home sales to late last year, according to RDQ Economics. The changes could deter some home sales in states with many high-end homes or high taxes.
“It seems clear that we shouldn’t expect a big breakthrough in new home sales anytime soon and should instead look for incremental progress at best,” said Zillow senior economist Aaron Terrazas.