Low Existing Home Inventory Fueling Buyer Interest in New Homes
Posted: June 2, 2023 | Tradewinds
As the National Association of Home Builders (NAHB) celebrates National Homeownership Month in June, more Americans are turning to new home construction as existing inventory remains low and mortgage rates begin to stabilize. Sales of newly built, single-family homes increased in April, reaching the highest level since March 2022.
“Buyers are purchasing new homes so they can start investing in homeownership now instead of waiting for an existing home to come on the market,” said NAHB Chairman Alicia Huey, a custom home builder and developer from Birmingham, Ala. “Builders want to meet buyer demand; however, high construction costs and labor shortages remain persistent challenges for the residential construction industry.”
Limited existing inventory has placed a renewed emphasis on new construction. In addition, new home construction is taking on an increased role in the marketplace because many home owners with loans well below current mortgage rates are electing to stay put. Current interest rates have more than doubled from 2021. As a result, the supply of existing homes is incredibly low.
With limited available housing inventory, new construction will continue to be a significant part of prospective buyers’ searches in the quarters ahead.
This housing environment is fueling cautious optimism among builders; however, they continue to face challenges in meeting the demand for new construction. Residential construction obstacles include shortages of distribution transformers, other building materials and tightening credit conditions for residential real estate development and construction brought on by the actions of the Federal Reserve to raise interest rates.
On June 7, builders from across the country will meet with lawmakers on Capitol Hill in Washington, D.C., to discuss solutions for ramping up distribution transformer production and investing in skilled trades training programs nationwide. Transformer delays and limited growth of the skilled labor workforce aggravate the nation’s housing affordability crisis. In an NAHB analysis of home buyer perception in the first quarter of the year, the inability to find an affordable home remains the most common reason buyers looking for three months or more are unable to make a purchase.
ABOUT NAHB: The National Association of Home Builders is a Washington-based trade association representing more than 140,000 members involved in home building, remodeling, multifamily construction, property management, subcontracting, design, housing finance, building product manufacturing and other aspects of residential and light commercial construction. NAHB is affiliated with 700 state and local home builders associations around the country. NAHB's builder members will construct about 80% of the new housing units projected for this year.
Image by F. Muhammad from Pixabay