|If you build it, they will come.
That might be the housing market’s motto for the foreseeable future, as homebuilders represent a bright spot in an otherwise bleak landscape for hopeful homeowners.
US construction on new homes rose 22% in May. The month also had the highest number of new foundations laid since April 2022. The uptick in building, along with surveys showing builders are feeling bullish, indicates new homes could help ease some of the issues facing the current housing market, James Rodriguez reports.
When discussing houses, talk of mortgage rates — where 7% has become the “new normal” — usually isn’t far behind. But new homes could solve some of those pain points.
One problem is that most homeowners aren’t eager to sell knowing they’ll have to give up their much-lower rate. As a result, supply has dried up, creating a housing-market “ice age,” per James’ previous reporting.
New homes, obviously, don’t have that issue.
On the flip side, high rates also deter buyers. But here, too, new homes have a solution. Some builders are offering to pay for a buyer’s rate buydown, which amounts to fronting cash to reduce the rate of one’s mortgage over the long term.
Still, as James points out, new homes aren’t a silver bullet for all the housing-market woes. The current pace of production won’t fix things overnight.
How aggressively homebuilders decide to ramp up operations will be interesting to watch.
The market’s limited supply represents an opportunity for new construction to fill the gap. But for some builders, the scars from the housing bubble that preceded the Great Recession haven’t faded.
Unfortunately, homebuilders will be flying blind for a bit. With the start of school just around the corner, housing demand is bound to decrease at least slightly as buyers with families won’t look to move during the school year.
That leaves roughly seven months, about the average time it takes to build a home, for builders to get their houses in order (pun intended) in time for the unofficial start of the spring season for real estate: the Super Bowl.