You might have heard that the number of brand-new homes available right now is higher than usual. Currently, about one in three homes on the market is newly built. If you’re curious about what this means for the housing market and your own move, here’s what you need to know.
People remember what happened to the housing market in 2008, when one of the factors contributing to the crash was an excess of homes for sale. Although only a portion of that oversupply came from builders, the lasting impact is that some people still feel uneasy when they hear that new home construction has increased.
The graph below, using data from the Census, illustrates the number of new houses built over the past 52 years. After the crash in 2008, there was a prolonged period of underbuilding (indicated in red). It wasn’t until recently that we finally reached the long-term average for the number of homes built in a typical year.
This demonstrates that, even with the recent increase in new builds, there won’t be an oversupply of homes for sale. The gap left by over a decade of underbuilding is too large to close quickly. And if you’re still concerned that builders are overdoing it, here’s something else that should reassure you.
New Home Construction May Be At Its Peak For The Year
The latest data from the Census on housing starts (homes where builders have just broken ground) and permits (homes where builders can start development soon) shows that builders are currently slowing down their pace. Why is that?
They’re responding to still-high mortgage rates and the impact those rates are having on buyer demand. Essentially, they are appropriately adjusting their activity in response to market conditions. As an article from HousingWire explains:
“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.”
You May Have More Opotions Now vs Later