Housing Inventory Shortage Can be Assuaged by New Construction
We’ve referenced the shortage of housing inventory throughout the year, and at the moment, it does not look like that reality will change. A normal housing inventory would see a 6 month supply of homes for sale, we are below 4 months at present. Decreased inventory is driving up prices in this seller’s market. That said, there is a solution for prospective home buyers who may be concerned that there’s not enough of the types of home thy seek to “ go around” in their local.
New construction is increasing in lower prices ranges, meaning new homes will make up a portion of the 2-month deficiency in housing stock for anyone entering the buying market.
The biggest challenge to today’s housing market is the shortage of housing inventory for sale. A normal market would see a six-month supply of homes for sale. Currently, that number is below four months. This is the major reason home prices have continued to appreciate at higher levels than historic averages. The good news is that builders are now starting to build more homes in lower price ranges, which help to fill the gap of the missing 2 months inventory.
Ina recent article, the Wall Street Journal noted: “Home builders are beginning to shift their focus away from luxury homes and toward homes at lower price points to cater to this burgeoning millennial clientele.”
Despite lower inventories, consumer confidence in home buying continues to grow, meaning inventory or not, the market is looking to enter the home buying fray.
“The HMI measure of future sales conditions reached its highest level since June 2005, a sign of growing consumer confidence in the new home market. Especially as existing home inventory remains tight, we can expect increased demand for new construction moving forward.” ~ NAHB Economist Robert Dietz.
As home buyer demand continues to press on the lack of homes available, home builders look to make out well by supplying the demand with new construction.
Talk to a local mortgage professional today to see what criteria you have to meet to qualify for a new construction mortgage loan.
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