A Shortage of Existing Homes Drives Shoppers to New Construction | Realtor Magazine
As home shoppers find fewer existing homes for sale, they’re increasingly turning to new construction, The Wall Street Journalreports. New single-family home sales jumped nearly 14% in July from June and are at the highest level since December 2006, the Commerce Department reports.
“The demand feels really good right now,” Martin Connor, chief financial officer at Toll Brothers Inc., toldThe Wall Street Journal. “The longer it goes, the more comfortable we are that it’s got longer legs.”
When coronavirus lockdowns hit this spring, builders in many areas of the country were forced to halt construction. That prompted builders to put the brakes on many housing projects and plans and cut spending on land acquisitions for new projects, believing the sector was headed for a downturn.
By this summer, however, buyers started flooding new-home sites. Builder confidence now matches the highest on record from 1998, as homebuilders feel more upbeat about new-home construction’s strong rebound.
Younger millennials, those entering their early 30s, are making up a growing number of sales.
But home buyers are outnumbering supply in both the previously owned and new-home markets. Just 3.1 months of existing homes were available for sale at the end of July. The new-home market has a 4-month supply, which is still low but a greater supply than previously owned homes.
Home builders are raising prices due to demand and a recent increase in lumber prices. The median sales price of a new home sold in July was $330,600, which is up 7.2% from a year earlier.
Despite the surge in demand, homebuilders are limited in how quickly they can increase their inventories to meet demand. A shortage of skilled labor and a rise in land costs are also hampering build timelines, Ali Wolf, chief economist at Meyers Research, toldThe Wall Street Journal.
“You can’t just build 25% more houses,” Sheryl Palmer, chief executive of Taylor Morrison Home Corp., toldThe Wall Street Journal. “We just won’t be able to meet the demand overnight.”