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New Home Construction and Sales
You’re intrigued about the possibility of owning a new home. New home buyers have a chance if they have a downpayment and able to use the $15,000 new homebuyers credit proposed by Joe Biden.
With interest rates so low, and the housing market expected to soar in 2021, this might be the time to prepare to purchase. Supply and finding a home to buy will be your biggest challenge. The question is whether home builders are enabled to build and whether they can access funding to start projects.
New home starts and completions are important stats when combined with resale housing market stats. It shows us where supply and prices are really headed. Prices are rising and supply continues to dwindle.
Most homebuyers have the money to buy, however we’re actually in a lull where some buyers are concerned about their jobs until a stimulus deal is done. They will likely return to the market in January thus pushing house prices higher.
In August, new home starts and completions fell from July’s very strong numbers but have added to a big uptick recently as you can see in the graphics below. Median new home prices sold dropped slightly from $327,800 in July to $312,800 in August. However, sales rose above July’s totals.
The market demand is very strong, and since supply is weakening, we can expect upward price pressure through the fall, as buyers still interested in the housing market.
New Home Sales Rocket
Sales of new single-family houses in August 2020 rose 4.8% above July’s 956,00 sales to a new total of 1,011,000 homes. August’s median home sold price to $312,800. Inventory of new houses for sale at the end of August was 282,000 which equates to of 3.3 months supply at the current sales rate.
New Housing Starts
Privately owned housing starts grew only 1.9% in September. The new rates if 1,274,000 units. Single family house starts rose 8.5% to 1,108,000 units. For buildings with 5 more units (apartments, condos, multifamily) new construction starts was 295,000.
New Home Construction Completions
Completions are the number most want to hear as it represents homes for sale eager buyers can move into.
Privately-owned housing completions rose 15.3% from the August volume of 1,333,000 to a new level of 1,413,000. Single-family housing completions in September rose 2.1% to 921,000 units, far beyond July’s rate of 954,000 house completions and above August’s rate of 1,038,000. The August completion rate for units in buildings with five units or more rose 390,000 to 480,000 units.
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.
New Home Construction Rates Rise Briskly
Yesterday’s Commerce Department home construction report showed new home building is up 22.6% in July. And new new home starts accelerated to a seasonally adjusted 1.5 million in July, the highest rate since February 2020. Amazingly, this rate is 39% higher than July of 2019.
Apartments and condominium construction rose 56.7% and single-family home construction chipped in a further 8.2%. In previous months, multifamily units were in a construction and sales drought. Applications for building permits jumped almost 19% last month to 1.5 million.
The CD reported that construction grew in all regions of the US in July: 35.3% in the Northeast, 33.2% in the South, and 5.8% in both the Midwest and the West.
Previously, Taylor Morrison Homes the No. 5 U.S. home builder, whose sales declined 30% in April versus a year earlier, reported a 17% increase in May. “We’ve seen that momentum continue,” CEO Sheryl Palmer says. “How we can go from peak to trough back to peak again, all in about 10, 12 weeks, is unlike anything I’ve seen.” — from Barrons news report.
The reason for the growth in new home sales may be due to a big change in home buyer’s values. With the threat of Covid 19 and a preference for the burbs or rural areas, new work at home routines, and low mortgage rates, some buyers see new homes as the right choice going forward into 2021.
I’ve forecasted that home prices will rise this summer. It may even be a bidding war market.
New Home Inventory Falling
In June, new home inventory fell to a 5.6 months supply, with 318,000 new single-family homes for sale. Inventory is down 16.4% from May 2019. Only 76,000 units are completed, ready to occupy. The median new home sales price was $317,900 while the median price twelve months ago was $312,700.
Across the US, the year-to-date basis new home sales were up in all US regions: 6.8% in the Northeast, and 1.4% in the West, 0.3% in the South, and 9.5% in the Midwest.
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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 Housing Construction Starts
Census.gov reported privately-owned housing starts in May rose 4.2% to a seasonally adjusted annual rate of 974,000. This was 4.3% above the revised April estimate of 934,000, and is still below last May’s rate of 1,268,000 units. This drop of 650,000 homes started per month has created a huge shortage of new homes. With demand picking up, home prices should rise.
Home Builder Confidence Rising
And home builders are forecasting better times for buyer demand and sales across the US. Builder confidence in the market for newly-built single-family homes jumped 6 points to 78 in July, according to the NAHB /Wells Fargo Housing Market Index (HMI).
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.
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