New home sales posted a sharp decline for the month of June. Don’t worry. Builders are still cashing in with healthy profits. The Census Bureau said new home sales (contracts) for June posted at a seasonally adjusted annual rate of 676,000 units. That’s 6.6 percent lighter than May and 19.9 percent fewer new home sales than a year ago.

According to Census figures, the median price of a new home contracted in June was $361,800. The average price of new construction was $428,700. Even with mortgage interest rates hovering near 3 percent last month that’s pretty expensive, and apparently more than some buyers were willing to swallow. It’s also worth noting that home builders have intentionally pulled back production to manage input costs and inventory levels.

Before you get all teary eyed about the home construction industry, get a load of the nation’s largest builder, D.R. Horton. Horton just posted a $1.1 billion profit in the latest 3-month period even though they sold fewer new homes. Yep. They’re passing those inflationary pricing pressures on to consumers with the unprecedented leverage they have been granted in the market. With most of the resale market still AWOL builders are cashing in big time.

North Texas-based D.R. Horton was so giddy about their 77 percent year-over-year increase in net income they decided to buy back more of their own stock. Horton repurchased 2.6 million shares for a cool $241.2 million in the latest quarter. Even though net sales orders declined 17 percent last quarter, the dollar volume of those orders rose 2 percent. This is how you make more money selling fewer homes when your competition has been sidelined. It doesn’t hurt that the Fed is still printing like there’s no tomorrow, facilitating the market inventory imbalances and rampant price inflation.

Looking at the latest Census numbers it is worth noting that the inventory of completed homes for sale is still near record lows. That 34,000 non-seasonally-adjusted number is just 1000 more than the previous low of 33,000 seen during the past three months. Builders are obviously not in a rush to flood the market with inventory. There may be 214,000 homes under construction, but a record 110 thousand homes have not been started. That’s roughly double the normal level, so overall inventory levels are a bit misleading (as in overstated). Anyone who has tried to go out and purchase a new home lately can surely relate.

New construction sales in North Texas cratered in June, falling 43 percent from June of last year. It could have something to do with the fact that the number of available new homes for sale has plunged back to 2013 levels. At the current pace of sales there is only 1.4 months of new construction supply in North Texas, one of the largest markets in the country. Remember what I said about the Census supply figures being overstated. LOL!

This massive shortage of inventory helped push new home prices in the DFW to record highs last month. The median price of a new home in North Texas hit a record $407,813. The average price of a new home in the DFW area hit $516,002 in June.

New home prices had been softening in Dallas-Fort Worth before Covid and the Federal Reserve’s liquidity bomb threw the market into chaos.

DFW Median & Average New Home Prices June 2021

It’s all transitory…until it isn’t.