Over the past year, the pace of new construction homes has been up a whopping 21.4%. According to the Commerce Department, there was a slight 3.6% dip in this number at the beginning of the new year, but permitting activity has seen a significant rise at 17.9% above last year’s rate.
What this tells us is that builders are ramping up to get to work over the months to come. What exactly is responsible for this spike in building activity?
The big picture
Mortgage rates are at an all time low and job growth has been reaching a faster pace over the past years. As a result, it has become more achievable for home buyers to invest in their own home purchase.
However, the demand is so high in the Real Estate market right now that inventory has been low. To combat this issue, many buyers are opting to find their dream home by simply creating it.
What the experts say
Ali Wolf, the director of economic research at Meyers Reach Group says, “Builders are pivoting their supply to help address entry-level demand, but scarce developable land in desirable locations met with high prices is making their job hard”. He reassures that even with this tight supply, the new home market is still on track to soar in sales higher than in 2007.
In the past, building your own home was seen as an unattainable luxury. But Ken Leon, director of equity research at CFRA Research, writes, “Homebuilders are getting smart about how to delight millennials in order to reduce pain points. The industry is shifting to entry-level homes with more open space.”
What is to come
Fannie Mae’s Economic and Strategic Research Group predicts new home sales to grow 5% in 2020, and 5.5% in 2021. It is also predicted that this growth will become rapid at the tail-end of the year. This is because researchers are expecting existing home sales to decline in the third quarter of 2020.
With new-home sales expecting to rise to 750,000 this year, which puts them at a 13-year high, the supply and demand is certainly there. Existing-home sales will continue to be held down by lack of supply, rising modestly to 5.6 million, a 4 percent increase. The national median sale price of an existing home is expected to grow to $270,400, an increase of 4.3 percent from 2019.
With these predictions and forecasts in the favor of new home starts, now is as good a as time as any to get the process started on building your dream home. Call us today and we will help you make that dream a reality!