Hope on the rise for brand-new homes
News around the housing market has been hesitant at best. But while new home construction was constrained at the start of the year, the National Association of Realtors® (NAR) reports a surprisingly upbeat vibe coming from the construction industry.
As 2023 got rolling, inflated building materials costs and consumer fears were showing some effect on confidence levels around the building of new homes. By spring, however, polls are showing builder confidence on the rise, according to the National Association of Home Builders (NAHB) and Wells Fargo Housing Market Index. Persistently low listing inventory seems to be the key, suggesting that a lower number of existing homes for sale could shift the focus of home buyers to the new-home market. NAHB’s chair, Alicia Huey, told NAR, “A significant amount of housing demand exists on the sidelines. Even as builders continue to deal with stubbornly high construction costs and material supply chain disruptions, they report strong pent-up demand as buyers wait for interest rates to drop.”
These are not just rose-colored glasses at work. While construction has been down more than 30% from the previous year, showing caution amongst builders in the face of more “normal” mortgage rates (last year’s super-low rates appear to have been a historical anomaly), the construction of single-family homes is ramping up slowly, according to the Department of Housing and Urban Development (HUD) and the Census Bureau, in their report just a few weeks ago.
Although we’re still likely to see some rough months ahead and it will take time to stabilize interest rates, their report offers hope for more robust construction activity later this year, despite additional hurdles such as the recent and surprising collapse of three banks. But Robert Dietz, NAHB’s chief economist, suggests to NAR that such a situation could actually help drive long-term interest rates lower, clearing the way for increased housing demand: “This should lead to a sustained rebound for single-family starts in the latter part of 2023.” Existing inventory might help, too: while available listings remained low in January, more recent NAR data shows that those options have inched up by more than 15% compared to a year ago.
All of this change may be creating an opportunity for those who want to build a new home, as many home builders have been experimenting with price reductions and other incentives to entice customers. If you’re serious about creating something new, it might be prudent to schedule your consultations sooner rather than later.
