Surging Prices for New U.S. Homes Suggest Tight Low-End Supply

Record prices for new U.S. homes amid a sales pickup indicate the supply of houses may be tight at the lower end of the market, pinching first-time buyers, government data showed Friday.

Low mortgage rates, a solid labor market and rising wages continue to drive steady demand for housing while scarce inventory sends prices to the highest ever, a trend that could squeeze first-time buyers. The industry faces headwinds including a lack of available workers and a limited number of plots to build on. Even with the gain, the pace of sales remains at less than half the peak seen in 2005. Any supply rebound may be a ways off, as new-home construction starts are down in recent months and permits were at a one-year low in May, according to government data.