LOS ANGELES — The number of U.S. homes that typically change hands as people relocate for work, retire or trade up for more living space hasn’t been this low in nearly 30 years.

About 28 out of every 1,000 homes changed hands between January and September. That is the lowest U.S. home turnover rate going back to at least the 1990s, according to an analysis by Redfin.

The home turnover rate represents the number of homes sold, divided by the total number of existing sellable properties. While sales data show whether more or fewer homes are selling in a given period, the home turnover rate helps illustrate how homeowners are staying put longer.

“It’s not healthy for the economy that people are staying put,” said Daryl Fairweather, chief economist at Redfin.

The home sales turnover rate through the first nine months of this year is down about 30 percent from the average rate over the same time periods between 2012 and 2022.

Traditionally, a breadwinner’s new job or a growing family’s need for more space motivate homeowners to sell and relocate. The fact that fewer homes are changing hands suggests there are fewer opportunities for employment mobility or perhaps selling and buying at today’s prices and mortgage rates is unaffordable.

“If people are stuck, it’s reflective of how the economy is stuck,” Fairweather said. “We’re in a low-hire, low-fire labor market and I think that this goes hand in hand with that.”

U.S. employers added just 22,000 jobs in August, according to the Labor Department, down from 79,000 in July and well below the 80,000 that economists had expected.

Government hiring data is on hold during the shutdown, so the Labor Department’s tally of hiring in September was never released, but earlier this month a survey by payroll company ADP showed that the private sector lost 32,000 jobs in September.

Meanwhile, several large companies, including Microsoft, General Motors, Amazon and Target, have announced job cuts.

The slowing job market has many Americans increasingly concerned. That is not a good recipe for home sales.

Another factor keeping a lid on home sales: Many homeowners who bought or refinanced at rock-bottom mortgage rates in 2020 and 2021 have little incentive to sell and buy a home at current home loan rates.

The U.S. housing market has been in a slump dating back to 2022, the year mortgage rates began climbing from historic lows that fueled a homebuying frenzy at the start of this decade.

Sales of previously occupied U.S. homes sank last year to their lowest level in nearly 30 years. Sales have been sluggish this year, although they accelerated last month to their fastest pace since February as mortgage rates eased. The average rate for a 30-year mortgage fell last week to its lowest level in more than a year.

While lower rates boost home shoppers’ purchasing power, borrowing costs remain too high for many Americans to afford to buy a home following years of skyrocketing prices. The median sales price of a previously occupied U.S. home has risen 53 percent over the past six years.

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LOS ANGELES — For years, skyrocketing home values and a modest market inventory gave homeowners the upper hand in transactions. That’s no longer a given.

Across the country, it’s getting tougher for sellers to drive a hard bargain. A dearth of home shoppers who can afford to buy and uncertainty about the outlook for the economy, jobs and mortgage rates is putting pressure on sellers to give ground at the negotiating table.

In some markets, mainly in the South and West, homeowners eager to sell are more likely to give buyers a better deal. This could include a lower price, up-front money to reduce the buyer’s mortgage rate, and funds for closing costs and any repairs or improvements that may pop up after the home inspection.

The reasons: Would-be buyers balk at what they view as unreasonable asking prices, while at the same time new construction is giving buyers more options and putting pressure on sellers to make their homes more appealing.

As a result, while the national median home listing price rose slightly in July, some metro areas saw a decline, signaling a reversal in the power dynamic between buyers and sellers. It’s rare to see the type of eye-popping bidding wars that boosted home values by roughly 50 percent nationally earlier this decade. Low-ball offers are more common.

Nevertheless, the housing market remains mired in a slump. Sales of previously occupied U.S. homes are running about 1.3 percent below where they were through the first seven months of last year, when they sank to their lowest level in nearly 30 years.

The national median home listing price rose slightly in July from a year earlier to $439,450, according to Realtor.com. The real estate listing company found the most a homebuyer who earns the median U.S. household income can afford to spend on a home is $298,000. The analysis assumes a 20 percent down payment and a 30-year mortgage at a fixed rate of 6.74 percent. By those criteria, 7 out of 10 home shoppers are priced out of the market.

The housing market has been in a rut since 2022, when mortgage rates began climbing from historic lows. The number of homes available for sale sank while prices kept rising.

Nationally, more homes are going on sale and remaining unsold longer because buyers have been unwilling or unable to make a deal. Active listings — a tally that encompasses all homes on the market except those pending a finalized sale — increased in July for the 21st month in a row, climbing nearly 25 percent from a year earlier, according to Realtor.com.

The inventory of homes for sale across the U.S. has increased gradually as the market has slowed and is now at a level where supply and demand are more balanced. But in states like Texas and Florida, the number of homes on the market has climbed sharply, partly because those states are hotbeds of new home construction.

Home shoppers may now have more leverage relative to sellers in the South and West, where home inventory has risen in the single digits, compared to pre-pandemic levels. Conditions are tougher in markets in the Midwest and Northeast, where the supply of homes remains 40 percent and 50 percent below pre-pandemic levels, respectively, according to Realtor.com.

After roughly two months on the market and three open houses, Doug McCormick’s home has yet to receive a single offer.

The retired business owner and his wife initially listed the 4-bedroom, 4.5-bath house located in Evergreen, a mountain community about 30 miles west of Denver, for $1.3 million. They lowered their asking price to about $1.28 million. That, too, failed to bring in a buyer.

McCormick, 80, says he’s hoping mortgage rates ease a bit and bring out more buyers. But he’s also considering just renting the property.

“That’s something that’s kind of in the back of my mind,” he said. “I keep reminding myself you only need one buyer.”

McCormick’s situation is not unique. As demand has slowed, more sellers have resorted to lowering their initial asking price — often multiple times — to no avail.

“Even though we are seeing a substantial amount of price reductions, sometimes it’s not enough to move the home; it’s still sitting,” said Annie Foushee, an agent with Redfin in Denver.

The median home listing price in Austin fell 4.9 percent in July from a year earlier, while in Miami it dropped 4.7 percent. Among other metro areas that had sharp drops in their listing price were: Chicago (4.4 percent), Los Angeles (4.2 percent) and Denver (4 percent).

In markets where buyers now have the upper hand, sellers who can afford to wait are often opting to pull their listing rather than be pressured into drastically reducing the price.

Tammy Tullis put her home in the Miami suburb of South Miami on the market in June. But the 4-bedroom, 3.5-bath house didn’t receive many offers initially, so she dropped her $2.8 million asking price by $100,000. That helped drive turnout during an open house, but she received only low-ball offers.

“They were like $400,000 to $500,000 off the mark,” said Tullis, 51.

Last month, the finance consultant took the listing down. She may relist it soon.

“I want to sell, but I’m not in a rush-rush,” Tullis said.

The Trump administration has pushed the Federal Reserve to lower interest rates, saying it would help the housing market. But homebuyers – and politicians – should keep in mind that the central bank directly influences only short-term rates, while most mortgages are based on the yield of the 10-year Treasury.

And while lower mortgage rates would boost home shoppers’ purchasing power, they also could bring in more buyers, giving sellers less incentive to keep lowering prices.

Economists generally expect the average rate for a 30-year mortgage to remain near the mid-6-percent range this year.

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Sales of previously occupied U.S. homes fell in April, as elevated mortgage rates and rising prices discouraged prospective homebuyers during what’s traditionally the busiest time of the year for the housing market.

Existing home sales dropped 0.5 percent last month, from March, to a seasonally adjusted annual rate of 4 million units, the National Association of Realtors said Thursday. The decline marks the slowest sales pace for the month of April going back to 2009 in the wake of the U.S. housing crisis. March’s sales pace was also that month’s slowest going back to 2009.

Sales fell 2 percent compared with April last year. The latest home sales fell slightly short of the 4.10 million pace economists were expecting, according to FactSet.

Home prices increased on an annual basis for the 22nd consecutive month, although at the slowest rate since July 2023. The national median sales price rose 1.8 percent in April from a year earlier to $414,000, an all-time high for the month.

“The affordability condition is clearly hurting the market, particularly higher mortgage rates,” said Lawrence Yun, NAR‘s chief economist.

For the past three years, sales of previously occupied U.S. homes have been at about 75 percent of what they were before the pandemic. The market slump began in early 2022, when mortgage rates began to climb from pandemic-era lows. Sales of homes fell last year to their lowest level in nearly 30 years.

The average rate for a 30-year mortgage has remained relatively close to its high so far this year of just above 7 percent, which it set in mid-January, according to mortgage buyer Freddie Mac. The average rate’s low point so far was five weeks ago, when it briefly dropped to 6.62 percent. Last week, it averaged 6.86 percent, its highest level since mid-February.

Homes purchased last month likely went under contract in March or April, when the average rate for a 30-year mortgage ranged from 6.62 to 6.83 percent.

High mortgage rates, which can add hundreds of dollars per month in costs for borrowers, have frozen out many would-be homebuyers struggling to find a home they can afford.

Homeownership is out of reach for many Americans after years of surging home prices. The median U.S. home sales price has jumped 53 percent over the past six years.

Home shoppers who can afford to buy at current mortgage rates are benefiting from more homes on the market when compared with recent years.

There were 1.45 million unsold homes at the end of last month, a 9 percent increase from March, and 20.8 percent more than April last year, NAR said. That’s the most homes on the market since September 2020, but still significantly fewer than the roughly 2 million homes for sale that was typical before the pandemic.

The latest unsold inventory snapshot translates to a 4.4-month supply at the current sales pace, up from a 3.5-month pace at the end of April last year. Traditionally, a supply of five to six months is considered a balanced market between buyers and sellers.

One reason the inventory of homes for sale has been rising is that properties are taking longer to sell. Homes typically remained on the market for 29 days last month before selling, up from 26 days in April last year, NAR said.

The wider selection of homes on the market likely helped boost sales among first-time homebuyers. They accounted for 34 percent of sales last month – the highest level since July 2020 but still down from the historical norm of 40 percent.

Home shoppers who can afford to sidestep mortgage rates and pay all cash for a home accounted for 25 percent of sales last month, down from 28 percent a year earlier. Investors, who account for many all-cash purchases, made up 15 percent of home sales last month, down from 16 percent a year earlier, NAR said.

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By Nirav Shah
Wealth of Geeks

According to , the median floor area square footage for single-family homes peaked in the first quarter of 2015 at 2,519. As of the second quarter of this year, median square footage has dropped to 2,191.

Homebuilders have ramped up construction by leaps and bounds to meet the ever-increasing home demand. However, new home buyers are getting less even though they’re paying more.

According to Redfin, the median home sale price in America increased from $288,203 to $422,137 — a 46 percent increase between July 2018 and October of this year.

Indiana-based homebuilder Estridge Homes recently introduced detached homes that are $50,000 to $75,000 cheaper and 300 to 500 square feet smaller than regular builds. According to The Wall Street Journal, to downsize new units, homebuilders are eliminating extra bathrooms and bedrooms. Zillow reports a 9.5 percent increase in the construction of single-family homes with less than three bedrooms from 2021 to 2022.

On the other hand, there was a 13.1 percent decrease in the construction of houses with three or more bedrooms during the same period.

John Burns Research and Consulting (JBREC) conducted a survey in April to understand how much American homes are shrinking. The study surveyed nearly 300 designers, residential architects, and design-oriented builders. They report a third of detached homes planned and built right now are likely to be under 2,000 square feet.

The average size of townhomes will be between 1,500 and 2,000 square feet.

As the newly built homes are likely to get smaller, builders have allocated more space to more heavily trafficked areas. Instead of building a formal dining room, the focus is shifting to larger kitchen islands with seating. Also, builders are sacrificing primary bedrooms with walk-in closets and opting for another small bedroom.

It is important to note that even though new homes are getting smaller in the United States, they are becoming less affordable. A newly built single-family home had a median price of $415,400 in June 2023. However, in that same month, an existing, similarly sized home was valued at $410,200. Homebuyers must still deal with the 30-year mortgage rate, though, but the builders are unwilling to do them a favor by slashing prices.

Understanding America’s Housing Affordability Crisis

America’s housing affordability crisis has not surfaced suddenly. It has been developing for many years. Many experts believe the problem snowballed since the Great Recession and has reached a precarious situation. Families earning the median annual income can no longer afford to buy a home in any of the major markets.

This housing affordability crisis can be attributed to many factors. First, new home builds have failed to keep pace with demand in local and national markets for many reasons, including labor shortages. When the housing bubble burst in 2008, a large part of the workforce involved in housing construction shifted to other fields and never came back.

As a result, when the market was ready to bounce back, it didn’t have a sufficient workforce. According to Moody’s, the country currently has a shortfall of 1.5 million homes. The National Association of Home Builders (NAHB) projects the industry needs to hire 2.2 million new workers through 2024 to keep up with the demand for homes built.

Another contributor to the country’s housing affordability crisis is rising home prices coupled with inflation. The median home price across the nation more than doubled between 2009 and 2022. While the growth of people’s wages has been modest, almost every sector of the economy has been impacted by inflation. In many cases, the added cost of living leads to less savings for home purchases.

To mitigate the impact of inflation, the Federal Reserve has aggressively increased interest rates. This has also affected the mortgage rates, which are directly associated with the purchasing power of potential homebuyers. The single-family homes market in America also suffers from the growing tendency of institutional investors to convert single-family homes (SFHs) into single-family rentals (SFRs). In a market that is already strained, converting a sizeable portion of the available supply has not helped the median home value.

Impact of Housing Crisis on Retirement Savings

Lack of affordable housing also significantly impacts an individual’s ability to save for retirement. Harvard University’s Joint Center for Housing Studies has recently published the State of the Nation’s Housing 2023 report, suggesting that in March 2023, purchasing a median-priced home required mortgage payments of $3,000 a month. The same report also mentioned that an income of $117,000 was needed to buy a median-priced home.

A limited supply of available homes means prices are steeper. Those looking to purchase a home may need to adjust their budget. This can impact their retirement savings in many different ways.

When home ownership accounts for a significant portion of income, there is less opportunity to save for retirement. Therefore, these homeowners may have to lead a low-cost lifestyle after retirement.

If the housing market is affordable, it may be possible for a homebuyer to pay off the mortgage before their retirement. Then, they can buy another home without debt by selling this home. However, this equity-building strategy is unlikely when home prices rise rapidly. The inability to buy homes in the early working years may mean renting for longer. Those purchasing homes later in life will find it more challenging to pay off their mortgage before retirement.

Food, entertainment, and other lifestyle-related costs are also higher in areas with steep home prices. The overall effect of rising prices can put a strain on a retiree’s budget. This is why many Americans nowadays want to relocate to less expensive regions before retirement.

Preparing for the Housing Affordability Crisis

The current housing affordability crisis in America is a matter of concern for everyone. Unfortunately, it isn’t easy to forecast when things will improve. Many experts suggest that one of the best ways to deal with this crisis is to prepare early by accruing savings.

The emerging lifestyle concept of Financial Independence Retire Early (FIRE) can be an excellent option. FIRE practitioners aim to achieve financial independence and retire early by cutting costs drastically and maximizing savings during the early stages of their professional careers. With sufficient savings, FIRE followers may find dealing with the housing crisis easier.

FIRE may not be an acceptable solution for people unwilling to sacrifice their lifestyle and luxuries. FatFIRE, a modified version of FIRE, can be the right retirement strategy for them. FatFIRE followers must accumulate about $3 million of assets before retirement. Therefore, it is suitable mostly for high-income professionals and entrepreneurs.

This article was produced by Media Decision and syndicated by Wealth of Geeks.

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By Ethan Duran
The Daily Reporter

Fuel, lumber, steel and trucking costs were on the decline while materials like copper, aluminum and concrete rose last month in the latest Associated General Contractors of America analysis. Experts within the association said some construction input costs dropped in December in a look at the latest Bureau of Labor Statistic data.

The producer price index for material and service inputs to new nonresidential construction fell by 1.8 percent for the sixth time in seven months, and the PPI for goods sank 2.7 percent — a drop like this last seen in November 2008, association officials said. However, materials and services were up 7.2 percent year-over-year and slightly outpaced a 6.5 percent increase in the consumer price index, which is the crystal ball of inflation.

Construction input costs were 7.9 percent higher than they were a year ago and nonresidential construction input prices were 7.6 percent higher, an Associated Builders and Contractors analysis showed. ABC‘s top economist Anirban Basu said the recent short-term price drops had both good and bad effects on the construction economy.

“This Producer Price Index data represents another positive development on the inflation front,” Basu said during a recent webinar. “However, this is both good and bad news. Recent consumer and producer price releases indicate that inflation is fading, though it remains well above the Federal Reserve’s 2 percent target. Should inflation continue to abate, the Federal Reserve may be able to stop increasing interest rates sooner than anticipated. Interest rate-sensitive segments like real estate and construction would be among the primary beneficiaries. Contractors are currently maintaining their longest backlog since 2019, according to ABC’s Construction Backlog Indicator.”

Falling prices may also indicate a shaky economy in the U.S. and other parts of the world, Basu said. “Moreover, there could be bad news on inflation in the months ahead. War continues in Eastern Europe and the commodity use-intensive Chinese economy is in the process of reopening. Though there is evidence of improving supply chain functioning and moderation in input prices, contractors should not be tempted into complacency,” he added.

The PPI for new nonresidential building construction, the measure of the price contractors would bid to build a fixed set of buildings, was flat for the month and up 19.4 percent year-over-year, the AGC said.

New residential construction PPI inputs fell 1.2 percent for the month but increased 6.9 percent year-over-year, followed by one-month declines for four product groups:

• Diesel fuel was down nearly 30 percent, but up 20 percent year-over-year;
• lumber and plywood were down 3.7 percent for the month and down 20 percent year-over-year;
• steel mill products were down 2.7 percent and down 29 percent, respectively; and
• truck freight transportation was down 1.7 percent and 8.2 percent year-over-year.

Meanwhile, copper and brass mill shapes had a PPI increase of 1.5 percent in November, but prices were down 3.6 percent year-over-year, AGC’s analysis showed. Ready-mixed concrete was up 1.4 percent for the month and 13.6 percent year-over-year and aluminum mill shapes were up 1.3 percent for the month and 5.7 percent year-over-year.

AGC found some concrete steel producers posted price increases in December for hot-rolled coil, and commercial retail tile producers announced price increases up to 8 percent in February.

U.S. hotel construction saw a slight increase in the last few weeks but plans for future rooms fell 16 percent, according to STR data analytics. Places like New York City, which has the most rooms under way, and Nashville were showing signs of a slowdown.

Single-family housing starts fell 1.4 percent in December at a seasonally adjusted annual rate from November and 22 percent year-over-year, the Census Bureau reported. Multifamily starts fell nearly 20 percent, with more permits out for the month but less compared to other years, leading analysts to suggest construction will decline when current projects are done. There were 926,000 multifamily units underway in December across the U.S.

The Federal Reserve projected a flat course for economic activity from mid-November to Jan. 9, according to its latest Beige Book report. “Housing markets continue to weaken, with sales and construction declining across Districts,” the central bank said. “Commercial real estate activity slowed slightly, on average, with more notable weakening in the office market. (Some) bankers said higher borrowing costs had begun to dampen commercial lending.”

Meanwhile, union membership in the industry dipped by 0.5 percent or 5,000, from an annual average of 1,024,000 in 2021 to 1,019,000 in 2022, the Bureau of Labor Statistics reported. There were 8,671,000 people employed in the construction industry last year, which is a 6.3 percent increase from 2021, but unionization rates still declined between years. The total of workers represented by unions was 1,076,000 (or 12.4 percent) in 2022, compared to 1,112,000 (or 13.6 percent) in 2021.

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By ALEX VEIGA
AP Business Writer

LOS ANGELES (AP) — Soaring home prices have pushed up average homeowner equity growth to the highest level in more than a decade, though recent signs of a cooling U.S. housing market point to more moderate gains in the second half of the year.

Homes with a mortgage gained an average of $51,500 in equity in the second quarter, an increase of 29.3 percent from the April-June quarter last year, according to real estate information company CoreLogic. That’s the highest quarterly average gain in home equity since the second quarter of 2010, the firm said.

That works out to nearly $3 trillion in equity gained by U.S. homeowners with a mortgage, which is about 63 percent of all homes, CoreLogic said. Average homeowner equity jumped nearly 20 percent in the first quarter from a year earlier.

Home equity growth can have broad impacts on the economy, giving homeowners more financial flexibility to spend on big purchases or build a nest egg. Rising home values also make it increasingly tougher for would-be homeowners to buy.

Homeowners in California, Washington state and Idaho saw among the biggest average equity increases in the second quarter: $116,000 in California, $103,000 in Washington state and $97,000 in Idaho.

The surge in homeowner equity gains follows a record run up in U.S. home prices this year amid a searing hot housing market fueled by ultra-low mortgage rates, a thin inventory of properties for sale and many would-be buyers’ desire for more living space during the pandemic.

S&P said this week that its closely watched S&P CoreLogic Case-Shiller 20-city home price index surged 19.9 percent in July from a year earlier, the largest gain on records dating back to 2000.

Still, there are signs the soaring home price gains fueling homeowner equity may have peaked.

The National Association of Realtors’ most recent housing market snapshot showed the median home price of previously occupied U.S. homes rose 14.9 percent in August from a year earlier to $356,700. That’s a more modest gain than earlier this year, when year-over-year increases were running at 20-25 percent.

“It seems that there was that shift from July to August where there starts to be a little bit of pushback in terms of where prices have gone,” said Ali Wolf, chief economist at Zonda Economics, a real estate industry tracker.

Wolf projects that U.S. home price growth will slow to about 5 percent next year, citing expectations of modestly higher mortgage rates and a small, but notable increase in the number of homes on the market.

“The days of runaway home price growth are behind us,” she said.

In its most recent quarterly housing forecast, mortgage buyer Freddie Mac envisions home prices growing 5.3 percent next year, down from a projected 12.1 percent increase in 2021.

If those home price outlooks hold, it would translate into a less torrid pace for homeowner equity growth next year. Still, the outsized growth in homeowner equity this year will have ripple effects for the broader economy, and the housing market.

Rising homeowner equity creates a buffer for borrowers against potential financial hardship, such as job loss. And it can give homeowners financial flexibility to borrow against their equity to pay off high-interest debt or finance large purchases, such as home improvement projects, which can give a boost to the economy.

“It is good for wider economic growth, but there’s an ugly side to today’s level of pricing,” Wolf said. “Those who have chosen not to purchase a home or have been unable to are finding it very hard to enter the market now, and in a lot of cases these individuals are missing out on wealth accumulation.”

The surge in home prices this year has made it tougher for would-be homeowners to buy. First-time buyers accounted for 29 percent of home sales in August, according to the National Association of Realtors. A year ago they made up 33 percent of buyers.

The U.S. homeownership rate was 65.4 percent in the second quarter, down from 66.6 percent last year and 66.2 percent a decade ago.

The increase in home equity has helped limit the number of homeowners who end up “underwater” on their mortgage, or owing more on their loan than their home is worth. Also known as being in negative equity, that can happen when a home’s value declines, or when the size of the mortgage increases, say when someone takes out a home equity loan.

At the end of the second quarter, 1.2 million homes, or 2.3 percent of all U.S. homes with a mortgage, were in negative equity, CoreLogic said. That’s down 30 percent from the same quarter last year.

Among U.S. metropolitan areas, Chicago had the biggest share of homes with negative equity in the April-June quarter at 5.2 percent, the firm said.

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Sale prices of Portland-area homes continued to climb in August, reaching a median cost of $525,000.

That was up 16.9 percent compared to a year ago, according to RMLS, a real estate listing service.

Low inventory continues to define the single-family housing market, depressing sales volume. RMLS reported 3,066 active listings in August, a 23.3 percent drop compared to a year ago. As a result, pending sales declined 4.4 percent compared to a year ago, but were up 5.4 percent from the previous month.

Closed sales were slightly better, increasing 2.2 percent compared to a year ago, but dropping 6.4 percent compared to July 2021.

Inventory came in at one month, up slightly from 0.9 of a month in July. Generally, six months is considered a balanced market.

Total time on market before sale was 23 days, a slight increase from July’s 20 days.

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By CHRISTOPHER RUGABER
AP Economics Writer

WASHINGTON (AP) — U.S. home prices soared in April at the fastest pace since 2005 as potential buyers bid up prices on a limited supply of available properties.

The S&P CoreLogic Case-Shiller 20-city home price index jumped nearly 15 percent in April from the previous year. That is up from a 13.4 percent annual gain in March.

Many Americans have sought more living space since the pandemic began, seeking larger homes in suburbs rather than apartments or smaller homes in cities.

Historically low mortgage rates, restrained in part by the Federal Reserve’s low-interest rate policies, have also spurred demand, just as the large millennial generation ages into a peak home-buying period. The price gains have been so dramatic that home sales have started to slow as more would-be buyers are priced out of the market.

Still, economists said there is little sign that the housing market‘s blistering price increases are likely to cool off soon.

“The forces that have propelled home price growth to new highs over the past year remain in place and are offering little evidence of abating,” said Matthew Speakman, an economist at real estate data provider Zillow.

All 20 cities that make up the index reported higher year-over-year price gains in April than the previous month. Five cities — Charlotte, Cleveland, Dallas, Denver, and Seattle — had the largest 12-month price increases on records dating back 30 years.

Even as demand rose during the pandemic, fewer Americans were willing to sell their properties, perhaps reluctant to have waves of potential buyers troop through their homes. That sharply reduced the number of houses available, setting off bidding wars for most properties. Last month, nearly half of homes sold were selling for above their asking price, according to realty company Redfin.

In May, the number of available homes ticked up slightly, to 1.23 million. But that was still down 21 percent compared with a year earlier.

Sales of existing homes have fallen for four straight months, likely because soaring prices have discouraged some would-be buyers. Still, demand is strong enough that a typical home was on the market for just 17 days in May, the National Association of Realtors said. Nearly nine of 10 homes were on the market for less than a month.

Phoenix reported the largest price gain in April for the 22nd straight month, according to the Case-Shiller index, with an increase of 22.3 percent from a year earlier. San Diego followed at 21.6 percent, followed by Seattle at 20.2 percent.

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By MARTIN CRUTSINGER
AP Economics Writer

WASHINGTON (AP) — U.S. home construction fell a surprisingly sharp 9.5 percent in April and economists attributed that partially to builders that delayed projects because of a surge in lumber prices and other supply constraints.

The April decline left construction at a seasonally adjusted annual rate of 1.57 million units, the Commerce Department said Tuesday. That was down from a rate of 1.73 million units in March, which had been the best showing since the peak of the housing boom in 2006.

Applications for building permits, considered a good sign of future activity, rose 0.3 percent in April to an annual rate of 1.76 million units, a good sign that the April dip in construction will be temporary.

Economists said the April dip is consistent with reports projects delayed by soaring lumber prices and snarled supply chains that have made it difficult to get products like appliances.

The price of lumber alone has added $35,872 to the price of an average single-family home, according to the National Association of Home Builders. Part of those increases are new border taxes imposed by the Trump administration in a trade dispute with Canada. There was also a temporary shut-down in production when the pandemic hit a year ago.

Even with the higher prices, economists expect housing, one of the stand-out performers in last year’s pandemic, will continue to show strength in 2021.

“Strong demand, a need for inventory and homebuilder optimism will support housing starts over the rest of 2021, while record-high lumber prices and supply chain bottlenecks may act as headwinds,” said Nancy Vanden Houten, lead economist at Oxford Economics.

She predicted housing construction would hit 1.6 million units this year, up from 1.38 million last year. That would be the best annual showing since 2006.

The weakness in April reflected a 13.4 percent drop in construction starts for single-family homes, which declined to an annual rate of 1.09 million units. Construction of apartments with five units or more rose by 4 percent to 470,000 units.

The April decline in construction was led by a 34. percent fall in the Midwest followed by an 11.5 percent drop in the South. Construction rose 9 percent in the West and was up 6.2 percent in the Northeast.

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By ALEX VEIGA
AP Business Writer

U.S. homebuilders are poised to benefit this spring homebuying season amid strong demand, low mortgage rates and an all-time low inventory of previously occupied homes for sale. But soaring lumber prices and a shortage of construction-ready land could limit their ability to capitalize on the strong housing market trends, analysts say.

The price of lumber more than doubled over the last year to an all-time high, reflecting strong demand for new construction and home remodeling, and pandemic-related problems limiting production.

The sharp rise in the cost of lumber, among other building materials, is a concern to builders because it drives up costs, potentially shrinking the pool of would-be buyers who can afford to purchase a home.

Builders are also grappling with a shrinking supply of developed lots, or land that’s ready for construction.

Ali Wolf, chief economist at housing market data tracker Zonda Economics, forecasts that new U.S. home sales will rise 5 percent this year over 2020. That would be a far slower pace of growth than the nearly 20 percent jump last year from 2019.

“Supply is the limiting factor,” Wolf said. “If builders had more homes to sell, sales would be higher.”

Robert Dietz, the National Association of Home Builders’ chief economist, hasn’t issued a forecast, but also expects sales to grow at a slower pace, despite an overall strong housing market.

“The homebuilding market is going to grow in 2021, but the growth rate itself is going to be lower than what we experienced in 2020, due to the fact that these housing affordability headwinds like lumber, a lack of lots, are becoming more binding this year,” Dietz said.

The housing market mounted a strong comeback last summer after declining sharply in the spring when the coronavirus outbreak hit. Sales of previously occupied U.S. homes surged last year to the highest level since 2006 at the height of the housing boom, according to the National Association of Realtors.

Sales of new homes, meanwhile, jumped 19 percent in 2020 over the previous year, according to the Commerce Department. New home sales climbed a further 4.3 percent last month.

Several market trends are driving strong demand for homeownership. Mortgage rates remain at historic lows. Americans forced to work from home in the pandemic are seeking larger homes. And more millennials are entering the market.

Other trends, including an all-time low inventory of resale homes of 1.04 million (less than two months’ supply), should pave the way for homebuilders to enjoy a banner year. But those prospects have dimmed amid the industry’s land and building supplies constraints.

“You’ll see (housing) starts and sales grow more slowly than they could if we didn’t have these issues with availability of land and availability of materials,” said Carl Reichardt, a BTIG homebuilding analyst.

Although the price of lumber, cement and other construction materials fluctuate constantly, the volatility has worsened over the past year as the coronavirus pandemic led to factory closures, a shortage of truckers and other issues that have made the normally smooth supply chain unpredictable. That’s meant shortages in items like windows and faucets, translating to higher costs and delayed construction projects.

The pandemic has also left some municipalities short-handed, which can mean delays in approving building permits, inspections or the process needed to get land cleared for new construction.

For builders having to deal with such obstacles, this means more delays, uncertainty and difficulty in getting a home completed on time and on budget.

The rise in lumber prices, a consequence of many mills running at less than full capacity due to the pandemic, has been particularly worrisome for builders. A key building material used in framing new homes, it has been on a tear since April. It settled Tuesday at $1,018.10 per thousand board feet, just below the all-time high it set a day earlier, according to FactSet.

This surge in lumber has added more than $24,000 to the price of an average new single-family home, Dietz said.

“Costs are going up, it’s taking longer for materials to arrive, and it’s particularly acute in the lumber market,” he said.

For some builders, finding land to build on is a bigger problem.

Many builders tapped their own supply of construction-ready land parcels much faster last year than they anticipated in order to meet the strong demand. And some stopped buying land altogether for weeks after the pandemic struck in order to limit spending amid uncertainty about when housing demand would recover.

“The housing market was hotter than we all expected,” Wolf said. “And builders and developers burnt through lots quicker than anticipated.”

The number of lots available for new home construction has fallen steadily for years, reaching 630,800 last year, according to Zonda Economics. That’s down from 731,689 five years earlier. It can take a year or more to clear the hurdles required to turn raw land into a new home development.

The demand for lumber and other building materials has helped lift shares in companies that supply the construction industry. Weyerhaeuser, Rayonier, PotlatchDeltic are each up more than 26 percent, while Builders FirstSource is up 66.3 percent.

Homebuilders that have enough land to continue to grow their orders and their earnings are likely to have a better year than those who sold out their land, Reichardt said.

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