Housing Starts Rebound, Builders Aim To Win Buyers Back

Housing Starts Rebound, Builders Aim To Win Buyers Back

Do you like this Article ? 

Sign up HERE for your FREE M&M Account to receive more Real Estate related information and news and THIS article.

M&M Membership includes:  FREE Coaching Events & Workshops, access to our Real Estate News Group (Local & National Real Estate and Financial News), access to social media marketing tips and nuggets, So Cal weekly market report, and much more.

Housing Starts Rebound, Builders Aim To Win Buyers Back

Despite an unexpected jump in new construction in September, demand for new homes is falling due to high prices and mortgage rates. Builders are lowering their asks to boost buyer traffic.

Even as demand for new homes fizzles(link is external)—about a quarter of homebuilders are reducing their prices to attract more buyers as foot traffic falls—single-family construction jumped 3.4% in August, the Commerce Department reported Tuesday. Economists are calling it a “surprising bounce back” after five consecutive months of declines.

Still, builder sentiment fell in September to its lowest level since 2014, according to data from the National Association of Home Builders. Rising mortgage rates, which topped 6% last week, and construction delays due to supply chain disruptions are among builders’ top concerns, the NAHB’s report shows. More than half of builders surveyed say they are using incentives to bolster sales, including offering mortgage rate buydowns, free amenities and price reductions, according to the NAHB/Wells Fargo Housing Market Index.

Lawrence Yun, chief economist for the National Association of REALTORS®, lays the blame for the new-home market’s slump squarely on mortgage rates. “However, this month’s increase in housing starts implies that builders still see profit opportunities, even as they concede on prices,” Yun says. “Material prices, including for lumber, have been moderating, and fully completed homes are selling fast.” Unfinished homes that remain under construction are the ones sitting on the market for long periods, Yun adds.

The NAHB agrees with Yun’s assessment. “Buyer traffic is weak in many markets as more consumers remain on the sidelines due to high mortgage rates and home prices that are putting a new-home purchase out of financial reach for many households,” says Jerry Konter, the NAHB’s chairman. “In another indicator of weakening market, 24% of builders reported reducing home prices, up 19% last month.”

NAHB Chief Economist Robert Dietz adds that the “housing recession” shows few signs of abating as builders continue to grapple with elevated construction costs and buyers now face 6% mortgage rates.

Home building permits—a gauge of future construction—fell in August to the slowest pace in more than two years, the Commerce Department reports.

Multifamily Properties Continue to Shine

Meanwhile, multifamily construction climbed to its best monthly performance in 35 years. “Apartment demand has been strong, with rents rising at a historically high pace,” Yun says. “Those consumers unable to qualify for a mortgage at higher interest rates are renewing their rental leases. Job creation is also boosting the rental demand.” Construction on multifamily dwellings surged 28% in August to an annual pace of 640,000 units, the Commerce Department reports.

Still, builders remain worried. The Federal Reserve meets on Wednesday and is expected to raise its benchmark interest rate by another 75 basis points in an effort to tame inflation. Housing analysts are concerned about the further impact that could have on mortgage rates.

However, some economists point to the stubborn housing shortage as a saving grace that could keep the real estate market from a deep downturn. By some estimates, the nation was short about 5 million homes before the onset of the pandemic. “The shortage is not going away soon,” Yun says. “The near-term single-family outlook is complicated due to high mortgage rates. But the long-term outlook for homebuilders is bright due to the need to build more to fully relieve the housing shortage.”

Source: nar.realtor

Author: Melissa Dittmann Tracey

 

M&M NEWS

Related Articles

California Housing Market Report

California Buyers Still Can’t Afford Homes

The issue for California residential real estate remains the same. Poor affordability means that despite latent demand, buyers can’t afford the prices of homes in the Golden State. For that reason, many have left to find much cheaper homes in other states. Unemployment will likely be on the rise along with lower business profitability (tech sector continues to lay off workers) which means fewer buyers are likely for 3 to 6 months.

The stronger consumer optimism is running against sticky inflation and a likelihood the FED can’t lower interest rates. But will that discourage buyers in California? Demand is always intense in CA. No other place offers what California has, and buyers today do seem to put lifestyle at the top of their list.

5 Trends That Will Shape Luxury Real Estate in 2023

The luxury housing market, like most other real estate sectors, is adjusting to a slowdown. Affordability and home size are every bit as much on wealthy buyers’ minds as other consumers. “The reality is we are coming out of one of the best real estate markets in history,” Gary Gold, a luxury property specialist with Coldwell Banker Realty in Beverly Hills, Calif., notes in the latest Coldwell Banker Global Luxury Trends Report. “But that level of demand and price appreciation wasn’t sustainable.”

Nearly 90% of respondents to the Coldwell Banker survey say they believe the real estate market will be better than or the same as 2022 for property investment. The following emerging trends were noted in the report.