Sales of new U.S. homes plunged in June, a sign that real estate continues to be a weak spot in the economy.
New home sales fell 8.1% last month to a seasonally adjusted annual rate of 406,000, the Commerce Department said Thursday. The report also revised down the May sales rate 12% to 442,000.
Nationally, home sales had been improving through mid-2013, only to stumble over the past year due to a mix of rising prices, higher mortgage rates and meager wage growth.
Nasty winter storms weighed on sales this year, making it unlikely that U.S. sales can match the pace set in 2013.
High demand for new homes and a dwindling supply of ready-to-build lots are contributing to higher home prices in the tri-county, officials said.
The region's strengthening economy has spurred an increase in sales of newly built homes, a situation that has depleted the surplus of available lots that mostly sat idle during and after the recession years of 2007-09.
Some big homebuilders are starting to feel the impact.
"We've seen the demand increase even more, and it's challenging to stay ahead of it from a lot standpoint and time of construction standpoint," said Jason Byham, division president of Lennar Coastal Carolinas, which is involved in 13 developments in the region.
A report released last week, the Charleston New Homes Snapshot for 2014 from Carolina One Real Estate, says residential building permits in the region are running at about the same pace as last year. But it also added that construction activity could be forced to pull back because of the dearth of shovel-ready home sites.
"There's a lack of ready lots right now," said Will Jenkinson, broker-in-charge for Carolina One New Homes. "We have a lot less opportunities for construction, but from a demand standpoint, the market continues to outpace last year."
The firm's report shows that as of May, single-family home permits were at the highest since 2007, but almost flat compared with May 2013. One reason is that builders can't obtain their permits until they have the land in hand, Jenkinson said.
The increase in sales of both new and existing homes is being fueled by the region's growing population, the improving economy and low mortgage interest rates. The Charleston Trident Association of Realtors reported 12,901 homes changed hands n 2013, up 22 percent from 2012. Sales volume this year also has been increasing, though at a slower pace.
Phillip Ford, executive director of the Charleston Trident Home Builders Association, said some builders didn't expect such high demand for land within a relatively short period.
"I think it is mainly a function of demand picked up higher than anticipated, so this created a shortage," Ford said.
There may be no easy solutions to the lot shortage since it could take a year or longer before developers obtain the necessary permits and are able to clear enough land to ease the backlog, officials said. Jenkinson of Carolina One projected more lots will become available starting later this year and that the number will pick up more in 2015 and 2016.
"The market is pretty strong and the permits are up," Ford said. "Demand is there, it's just a matter of getting lots ready and getting the houses up."
Any construction delays, coupled with increasing costs for materials and labor, could put more pressure on home prices, experts said. Byham of Lennar noted that the Miami-based homebuilder has had to extend workdays for some projects and has had to push back some completion dates.
"There is certainly a price to be paid for that. ... We have the effect of that with the increase of the retail prices of homes in the last 12 months," Byham said.
One of the projects affected by the shortage is Lindera Preserve at Cane Bay Plantation in Goose Creek. Lennar is now adding a second phase to that subdivision, which will have 500 homes when all three phases are completed. Crews were busy this week forming new streets, clearing sites and building.
Byham said buyers don't seem to be discouraged by the impact of the short-term lot shortage.
"We kind of wished we had more lots available, but we are developing three different phases and we are selling phases even before the streets are in," he said. "They're buying homes based on paper."
A spokeswoman for Pulte Group, another large homebuilder in the Charleston region, declined to comment.
Streets signs are popping up as land is being cleared to build in the new phase of Lennar Homes at Lindera Preserve in Cane Bay Plantation.×
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