Temporary – Not a Trend
New home sales fell at a double-digit pace to a 536,000 annualized level for December, the weakest pace in almost a year. That was more dramatic than the drop in existing home sales reported earlier in the week and raises critical questions: Is the weakness in home sales due to the lack of move-in ready properties? Or is something larger at play? The answer is somewhere in between. Mortgage applications have fallen fairly dramatically from a year ago since interest rates surged in November and December. Some of the weakness will be offset by rising wages, particularly among college graduates later in the year. However, the inventory of houses for entry-level buyers, whose demand looks strongest, will remain constrained. This will continue to put upward pressure on home prices and stretch the limits of affordability for many younger buyers.
Everything, from rising materials costs, scarcity of urban properties and shortages of skilled carpenters and immigrant labor (many of whom left the industry after the housing bust), has limited development of cheaper, entry-level homes