U.S. housing starts, and what they mean for homebuyers
If you’re in the market to buy a house, you might be feeling the pinch of limited options. The existing housing shortage, coupled with surging mortgage rates, has created a challenging landscape for buyers. So, where will the houses come from? The answer lies in new construction, but it’s not as straightforward as it seems. To grasp what the future holds, we turn to a crucial metric: housing starts.
What are Housing Starts?
Housing starts refer to the number of new private residences, including single-family homes, condos, townhomes, and apartments, that have begun construction. It’s a vital metric tracked monthly by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development. They provide a detailed report on housing starts, completions, and new building permits issued.
Why Housing Starts Matter:
Housing is a linchpin of the U.S. economy, making housing starts a crucial economic indicator. Increasing housing production can help mitigate shelter inflation, a significant contributor to rising consumer prices. However, it’s essential to note that the pandemic led to a sharp decline in housing starts, and recovering from this dip has been a challenging journey.
The Impact on the Housing Market:
Housing starts hold significant sway over the housing market’s direction. A rise in this number signals an increase in inventory, which is excellent news for buyers struggling with the scarcity of existing homes. It’s also a positive sign for the real estate industry as a whole.
However, delving deeper into the data is key. The figure encompasses both single-family and multifamily housing, and sometimes, these trends can be at odds. For instance, a recent report revealed a 7.2 percent year-over-year drop in overall housing starts, concealing an 8.6 percent increase in single-family units and a 31.5 percent drop in multifamily units.
New Construction vs. Existing Homes:
Given the current scenario, potential buyers are pondering whether to wait or make a move. Many existing homeowners enjoy historically low mortgage rates, dissuading them from selling and buying at higher rates. However, for those undeterred, considering new-construction homes could be a viable solution. Recent data shows a significant surge in sales of new single-family homes, offering a glimmer of hope for those in search of a fresh start.
Considerations for New Construction:
Opting for a new-construction home has its pros and cons. On the plus side, you’re the first occupant, and customization options are available. Builders may even offer financial incentives. However, it’s worth noting that brand-new homes tend to come with a higher price tag, especially if you indulge in customizations. Additionally, the timeline is extended as you await completion.
Conclusion:
As you navigate the housing market, understanding housing starts and the potential of new construction is paramount. It offers a ray of hope for buyers amidst a challenging landscape. Partnering with a local real estate agent experienced in new developments can provide invaluable guidance. Ultimately, weighing the pros and cons will help you make an informed decision on whether to embark on the journey of new construction homeownership.