Momentum Is Building for New Home Construction
Low Inventory Woes
If you’re currently in the market for a new home, you know that the supply of homes is low. Due to a variety of factors, there are limited options for you to choose from. If your biggest hurdle is finding that perfect place, there’s some good news ahead: New Home Construction is on the rise.
As the National Association of REALTORS (NAR) pointed out:
“Homebuyers continue to be met with limited housing options during what’s typically the real estate market’s busiest season… The current supply of existing homes is about half the level it was in 2019… Meanwhile the market for new construction is a bright spot.”[1]
New Construction
There’s a metric that shows just how much new home construction is ramping up nationwide. It’s called New Residential Completions. Completions are newly built homes that are finished and move-in ready. The graph below uses data from the
Census[2] to show the trend of new-home completions over time, including the long-term average for the number of finished housing units (shown in black below):
As you can see above (shown in orange, left), leading up to the housing crash, builders exceeded the average 1.5M mark (black line). The result was an oversupply of homes on the market, and so home values declined. This is one of the primary reasons for the housing crash in 2008, and why today’s market looks nothing like that one.
Since then, the level of new home construction has fallen off. Builders haven’t built enough homes to meet the historical average (shown in red). Underbuilding left the housing market with a multi-year inventory deficit, which is contributing to today’s low inventory as well.
And now the good news: today’s 1.5M mark (shown in green, right) shows that according to the latest report from the Census[3], builders are matching the long-term average right now. More newly built homes are coming to market than we’ve seen in recent memory.
Residential starts and permits are also gaining momentum. Starts are homes where the construction has officially kicked off. Permits are homes where builders are planning to break ground soon. Since both are up, it’s a sign there are even more newly built homes coming soon.
Why It Matters
More newly built homes in various stages of the construction process means your pool of options is growing. If you’re in the market to buy a home as soon as possible, reach out to a local REALTOR to explore the homes that were recently completed in your area. If construction is done on those homes, you should be able to move in quickly.
If you’re not in a hurry and the idea of customizing a home appeals to you, you can also explore options for homes in your area that are in the process of being built. If you buy a home that’s still under construction, you can usually help pick the features and finishings along the way. If nothing available on the market has been suitable for your tastes, this may be your best option.
Either way, make sure you’re consulting a trusted REALTOR, your local real estate expert. They’ll know exactly what’s available in your area and will base their recommendations on your unique needs, desired neighborhoods, and more.
Bottom Line
If low inventory is leading you to frustration, make sure you consider new home construction in your home search. Chances are, there are new home projects being built in the area you’re hoping to buy which could easily be completed within your time frame and on your budget.
Related Article: Owning a Home Helps Protect Against Inflation
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