It seems like there are more new homes up for grabs these days compared to usual. Approximately one out of every three homes currently on the market is a brand-new build. If you're curious about how this might impact the housing market and your upcoming move, here's the scoop.

Why This Isn’t Like 2008

It's common for people to recall the housing market crash of 2008 when discussing the current real estate landscape. The oversupply of homes for sale at that time, partly due to increased construction activity, significantly impacted the market. As a result, hearing about a surge in new home construction can still make some individuals anxious today.

Even though the supply of new homes has increased this year, there's no need to be concerned. Builders are not overbuilding; they are simply meeting the demand.

The chart displays data sourced from the Census, illustrating the quantity of newly constructed houses over the past 52 years. After the 2008 economic downturn, there was a prolonged phase of insufficient construction (highlighted in red). It is only recently that we have reached the historical average for annual new home constructions.

Despite the recent surge in new construction projects, it is unlikely that there will be a sudden surplus of homes for sale. The significant gap caused by more than a decade of underbuilding must be addressed first. For those concerned about potential overbuilding by builders, there is reassuring news.

New Home Construction May Be at Its Peak for the Year

The most recent data from the Census regarding housing starts (homes where builders have recently begun construction) and permits (homes where builders are authorized to start development soon) indicates a current slowdown in builder activity. This deceleration in pace could be attributed to various factors.

In response to the persistently high mortgage rates and their effects on buyer demand, individuals are understandably scaling back. This adjustment reflects the current market dynamics, as detailed in an article by HousingWire.

“Even with a massive housing shortage across the nation, homebuilders are completing their pipelines and not seeking as many permits to construct new single-family houses.”
— HousingWire

Builders are cautious due to the previous overbuilding during the crash and are now scaling back to prevent a similar scenario.

You May Have More Options Now Versus Later

If you're thinking about purchasing a newly constructed home, it's essential to note the current dynamics in the market. Builders are obtaining fewer permits and initiating fewer new construction projects, possibly indicating the peak for new home constructions this year. However, this doesn't indicate a complete halt in new home development; it signifies a gradual deceleration that will affect the availability of new homes entering the market later in the year. According to Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), the industry is experiencing this shift.

“Given the recent declines in housing starts, home completions will steadily show declines in about six months.”
— Lawrence Yun, Chief Economist at the National Association of Realtors (NAR)

If you're prepared and in a position to make a purchase now, you might discover a greater selection of newly constructed homes available for your consideration compared to waiting. This alone could be a compelling factor to begin your house-hunting journey.

Make sure to collaborate with a trusted local real estate agent during your home building journey. Your agent can provide essential information about builder reputations and other market-specific details. And if there's limited new construction in your area, they can suggest nearby locations with more options.

Bottom Line

While it's true that new home construction is currently a significant part of the market, this is actually seen as a positive development. Builders are not going overboard with construction, as they are being guided by market indicators to prevent a repeat of the errors from 2008.

If you are considering purchasing a new home while there is a wide selection available, feel free to get in touch with me.