Homebuilders are holding back sales amid historic demand
Yahoo Finance’s Sarah Paynter joins Zack Guzman to break down the latest in home sales, as homebuilders begin to restrain sales, looking to preserve supply for 2021.
Video Transcript
ZACK GUZMAN: Earlier in the week, we got data that showed the housing market continues to boom here in the pandemic, when we saw existing home sales hit at the highest mark that we've seen since 2006. And now, new home sales matching that, with the largest surge in sales for the month of August that we've seen in 14 years. Joining us now for more on the boom in housing is Yahoo Finance's Sarah Paynter. And Sarah, I mean, things are hot in the housing space right now.
SARAH PAYNTER: Yes, they are. So new home sales were up almost 5% in August. And that's after they were up almost 14% in July. So a lot of people are ordering new homes. And that's in part because there aren't enough existing homes on the market.
So existing, new-- they're all in really big demand, because a lot of people are looking for more space and moving into new places right now. So we're finding that homebuilders actually are seeing record demand they haven't seen since the housing bubble of 2007, 2005, and really hitting new records. And they actually can't keep up with demand.
ZACK GUZMAN: Yeah, we've seen inventory falling here, and the supply of new housing and existing housing already stretched here. But how are homebuilders grappling with all that, if they know that there are so many buyers out there fighting with each other to get into these things?
SARAH PAYNTER: Yeah. So in July and beginning of August, homebuilders were just so excited to see activity picking up that they started burning through their inventory and trying to meet homebuyer demand whenever they had orders. But as the quarter went on, they started to realize that it wasn't sustainable for them to continue to meet orders this way, because they have to continue to sell homes in 2021.
And they're expecting that sustained demand to continue into next year. So in all their earnings reports, builders are all emphasizing that they're starting to pace their sales so that they can keep on based on the number they can actually build. And I have economists telling me actually, builders have set a cap on the number of sales that they're going to do in a month. And if it reaches that number, they're just going to stop selling.
Another way that builders are doing that is by raising prices, which strikes a lot of buyers, because we're in an affordable housing crisis, as we have been for a long time. And prices are continuing to raise. So it just continues to show the disparity between really high earners during the coronavirus who are able to buy those homes and able to meet those prices that are getting higher and higher.
