Homebuilders are responding to an increase in new home sales and extremely low levels of existing home inventory, leading to faster starts on new projects. Privately owned housing starts in May 2023 projected at a seasonally adjusted annual rate of 1.63 million, up nearly 22% from the revised April 2023 estimate of 1.34 million. US Census Bureau,
Thank you for reading this post, don't forget to subscribe!There are now 1.69 million single-family and multi-family housing units under construction in the United States, the highest level recorded in the past 50 years.
Housing economists agree that market dynamics have turned the tide in favor of builders over the past 12 months, as homebuyers still frustrated by limited existing inventory take a closer look at new homes. Yesterday, the National Home Builders Association’s Builders Confidence Index crossed the midpoint of 50 (out of 100) for the first time since July 2022, confirming the return of an attractive market for homebuilders.
Overall, single-family housing starts totaled 997,000 in May, up 18.5% from the revised April figure of 841,000. The May rate for units in buildings of five units or more was 624,000.
There were 695,000 single-family units under construction in May, down from April and about 135,000 from the peak in May 2022, according to the Census Bureau.
Issued permits, an indicator for future completion, also rose 5.2% overall from April, even though they were down 12.7% from a year earlier. Completed homes increased by 9.5% from the previous month and were 5.0% above May 2022 levels.
The pace of single-family home completions picked up from last month, especially in the South and West, noted chief economist George Ratiu. Keeping up with current affairs in a statement.
After retreating from the market in the second half of 2022 due to the shock of rising mortgage rates, homebuyers have accepted a new general interest range of 6% – 7%, aided by incentives offered by homebuilders. With budgets redefined, buyers are looking for their first or next home in a market that is short of existing home inventory. Hence, more buyers are visiting model homes from builders, attracted by the benefits of availability, new technology, high efficiency and in some cases warranty.
The edge is in great demand, and potential buyers are increasingly turning to homebuilders first american Economist Ksenia Potapov. As a result, new homes, which historically made up about 11% of total inventory, now make up about 30%.
“With this uptick in demand for new homes, permits and starts are back positively, up from last April’s numbers,” said Zillow Senior economist Nicole Bachaud. “Along with new homes being completed, a steady flow of new homes is making its way into the market when needed most. This is welcome news in today’s challenging market.
Still, most new homes coming to the market are not affordable for entry-level buyers. The lack of affordability helped strengthen the rental market, including single-family rental homes, which in many cases have become an option for first-time buyers who are priced out of their market, Kelly said. Mangold, said the principal RCLCO Real Estate Consulting,
While homebuilders are all smiles now, there remain challenges: They still face labor shortages and rising lumber prices, following severe wildfires in Canada that forced sawmills to close. thereby reducing the available supply.
