New Home Construction

US New Home Construction, Prices and Sales

New US home sales rose 4% across the country in October and new home construction kept pace vs September.

New home starts and completions are important elements of the  housing market forecast.  They’re growing slowly but not enough to fulfill demand. It shows us where supply and prices are really headed. Homebuilder sentiment however rose to 83 and current sales conditions rose 3 points to 89 according to NAHB.  They report a 3% increase in new home buyer traffic.  Sales expectations for the next 6 months remained the same.

The latest Corona Virus variant is sending shockwaves through the economy, but we have to believe our vaccinations will keep us safe in North America. Elsewhere in the world, this variant could slow global growth and perhaps slow construction permits, starts and completions.  But slowing inflation might not affect US housing.

Year over year, new homes sales have plummeted by 23%.  However, sales of new construction homes rose 11% month to month from September to October in the Midwest and were up 0.2% in the Southern US region. In the Northeast and West sales dropped 11.8% 1.1% respectively.

If higher interest rates are avoided, we might see the residential home construction market improve in 2022. Growth from 2021 to now has been positive, even with supply chain and labor shortages. Those issues with high land prices, limited land to develop, plus government regulations will hamper new home availability in 2022 and beyond. That pushes prices up.

Lot availability is at multi-decade lows and the construction industry currently has more than 330,000 open positions,” said NAHB Chief Economist Robert Dietz. He is calling on politicians to resolve the severe shortage of lots, however these cries have been sounding for a long time now with no action.

Prices are rising and housing supply continues as the biggest factor in real estate. The fact is, government attempts to suppress demand don’t work and instead create unnatural pressures that can lead to market sell-offs.

You’re intrigued about the possibility of owning a new home. And like many others you might be wondering if resale house prices are going to fall?  Resale and new home prices likely aren’t going to fall and a housing market crash is not likely to happen. There’s too many positives supporting the economy and housing.

New Home Prices Rising

2021 Median Price (USD) Homes for Sale
January 373,200.00 300,000
February 362,000.00 303,000
March 359,600.00 305,000
April 376,600.00 315,000
May 390,400.00 327,000
June 374,700.00 350,000
July 406,000.00 365,000
August 407,600.00 382,000
September 404,700.00 383,000
October 407,700.00

 

US New Home Building Permits October

New home building permits issued during October rose 4% to an adjusted annual rate of 1,650,000. That is up from the September permit rate of 1,586,000 and up 3.4% from the October 2020 rate of 1,595,000 permits. Single‐family house permits issued during October rose 2.7% to an annualized rate of 1,069,000. That was up  2.7% from Septembers volume of 1,041,000 permits.

US Housing Starts During October

New residential housing starts fell .7% during October to a seasonal rate of 1,520,000. That was below the September start numbers of  1,530,000, homes, yet is up 0.4% from the rate of 1514,000 units in October 2020.  Single‐family housing starts during October rose 2.9% to an annual rate of 1,039,000 from September’s rate of 1,081,000 new starts.

US Housing Completions During October

New residential housing completions during October remained the same as September at a annual rate of  1,242,000 units.  Unfortunately for buyers, this is down 8.4 percent vs 12 months ago.  Single‐family house completions during October dropped 1.7% to 929,000 houses completed vs last month.

New home price timeline chart US.
New home price timeline chart US. Screenshot courtesy of Statista.

Most mid-income buyers have plenty of savings to put on a new house.  That fact means home builders are jumping into the construction with a lot of zeal this year.

New Residential Construction Stats for October

Census.gov released stats for new residential home construction.

Lumber Costs

NAHB cites lumber prices as having flattened out. Of course, availability is another issue during the supply chain problems and shipping within the US. They say there is a substantial shortager of carpenters.

Lumber Prices. Screenshot courtesy of NAHB.

Builder Optimism is High

The US Commerce Department says builder optimism is high and with low interest rates and big preference for buyers, there’s little to stop significant sales in August and September.  The only drawbacks are regulation and high lumber prices. With buyers finding houses for sale scarce, the new home market is vital to the health of the real estate market.

NAHB new home construction timeline chart. Screenshort courtesy of eyeonshouding.org

New Home Construction Forecast

NAHB offers their free new home construction forecast to 2023.

Housing and Interest Rate Forecast, 04/06/2021
2017 2018 2019 2020 2021 2022 2023
Housing Activity in thousands
Total Housing Starts 1,207 1,248 1,295 1,395 1,431 1,464 1,501
Single Family 851 872 893 1,000 1,058 1,081 1,108
Multifamily 356 376 403 396 374 383 394
New Single Family Sales 616 614 685 823 874 897 919
Existing Single-Family Home Sales 4,904 4,737 4,749 5,076 5,777 5,815 5,921
Interest Rates
Federal Funds Rate 1.38% 2.38% 1.38% 0.13% 0.07% 0.08% 0.26%
Treasury Yield:
Ten Year Maturity 2.33% 2.91% 2.14% 0.89% 1.74% 2.21% 2.47%
Freddie Mac Commitment Rate:
Fixed Rate Mortgages 3.99% 4.54% 3.94% 3.11% 3.41% 3.91% 4.17%
Prime Rate 4.10% 4.90% 5.28% 3.54% 3.55% 3.99% 4.43%

 

Wondering who makes and sells new homes in the US? Check out these companies and if you’re a stock market investor, review the stock prices of publicly listed home builders.

 

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New Residential Home Sales

NAHB’s Robert Dietz reported home builders using pricing incentives in April, but have since reduced those incentives as sales have picked up.

New Single Family Home Inventory 2020. Screen capture courtesy of NAHB

Don’t forget to check the housing market in 2021, and more on major metro markets in including Los Angeles, Denver, Dallas, Philadelphia, Atlanta, Boston and New York. See the state forecasts for Florida and California.

See the latest mortgage rate forecast, economic forecast, and why home prices will rise.

 

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