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New Home Construction

New Home Construction and Sales

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?

House prices likely aren’t going to fall and a housing market crash is definitely a long shot. The best hope for buyers is the big rise new home construction. Despite the continuing pandemic slowdown, home construction permits, completions and starts are on the rise. NAHB forecast for ongoing growth in single-family construction in 2021 is positive but a lower growth rate than 2020.

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 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.

There are a lot of homeowners who intend to sell their homes, and are waiting for prices to peak and for them to find another home to move to. Without somewhere to go, within a historic health pandemic and recession, they’re not like to sell. It’s one thing to want to sell, but completely different to actually do it.

New Home Prices Rising

According to NAHB Chairman Chuck Fowke, in a report, home prices have risen $24,000, mostly due to “insane lumber prices.”  Fortunately, the tariffs on Canadian lumber was reduced from 20% to 9% or the pain would be much worse.

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 March

Census.gov released stats for new residential home construction.

New Residential home construction. Screenshot courtesy of BEA.gov

US housing starts grew 19.4% to a seasonally adjusted annual rate of 1.74 million units.

Builder confidence remains strong, pointing to gains for single-family construction in 2021,” said NAHB Chairman Chuck Fowke. “However, rising costs for most kinds of building materials continue to impede positive additional momentum in the market.”

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.

Matthew Speakman, Zillow chief economist: “There is no avoiding the fact that prices of key materials are rising at their fastest rates in decades, and availability is often limited due to pandemic-driven supply chain disruptions. The question now is whether this enduring optimism can continue to translate into activity, and if a continuation of these conditions will eventually force builders to throttle back.” — from Reuter’s report.

New Home Sales Fall

In Robert Dietz’ report on new homes sales in February, he notes that after a slight rebound in December and January, the pace of new single-family home sales continued in February slowed. He attributes it to a combination of broader affordability challenges – higher rates and more costly materials – and late winter storm effects reduced the volume of purchases.

New single-family home sales dropped 18% in February to a 775,000 seasonally adjusted annual rate. Supply has increased which could help ease excessive new home prices.

New Home Sales February 2021. Screenshot courtesy of eyeonhousing.org

New Housing Starts

Privately-owned home construction starts in March rose to annual rate of 1,739,000, 19.4% from February’s estimate of 1,457,000 new units.  This is 37% above the March 2020 rate of 1,269,000. The multifamily sector (apartment buildings and condos, increased 30.8% to a 501,000 pace in new units started).

New Home Building Permits

Permits for privately-owned housing units in March were at a seasonally rose 2.7% to 1,766,000 units above the revised February rate of 1,720,000. This is 30.2 percent  above the March 2020 rate of 1,356,000 units. Single-family authorizations in March rose 4.6% to 1,199,000 units, 4.6% above the revised February figure of 1,146,000.

New Home Construction Completions

Privately-owned housing completions in March rose a brisk 16.6% to 1,580,000 homes, which was 23.4% above
February’s estimate of 1,355,000 homes. That was 13.7% above March 2020’s total of 1,280,000 units. Single-family housing completions in March rose 5.3% to 1,099,000, above the revised February rate of 1,044,000 units. The March rate for multifamily apartment buildings with five units or more was 476,000 units.

Compared to February, single-family and multifamily starts were 64% higher in the Northeast, 122.8% higher in the Midwest, 13.5% higher in the South and 13.6% lower in the West.

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.

Top New Home Builders in the US

Top new Home Builders. Screenshot courtesy of Builderonline

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.

Housing Starts History US. Screenshot courtesy of NAHB.

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 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.


Housing Market Next 5 Years | Home Price Forecast 2021 | Stock Market Crash Hedges |  Housing Market Forecast Part 2 | Cities with Lowest House PricesCorona Virus and the Real Estate Market | Will Home Prices Fall? |  Stock Market Forecast 2021Housing Market Crash? | Mortgage Rates 2021 | Mortgage Refinance Rates | Will Home Prices Fall in Florida? | Dallas Real Estate 2021 | Denver Real Estate 2021 | New Home Construction 2021 | Atlanta Real Estate |  Should I Buy a New Home?  | When Will House Prices Drop? | Sitemap | RSS Syndication

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