New construction, on the other hand, accounted for nearly a third of all active listings in May, up from 16% in the same month in 2019, according to Redfin. And in June, roughly 26% fewer properties hit the market compared to last year, noted. In May, pending sales of existing homes were down 2.7% from the prior month and a whopping 22% below a year ago, according to the National Association of Realtors. But the shock of higher mortgage rates and the vast disruptions during the pandemic have sent the two sales figures diverging, bucking that trend. Typically, sales of both existing and newly constructed homes tend to move in the same direction, de Chazal told me. "That activity, I thought, was going to continue to be weaker." "It was a huge surprise, from my perspective, on both housing starts and new home sales," Richard de Chazal, the macro analyst at William Blair, told me. Sales of newly built homes in May also reached an annual pace of 763,000, about 12% above the April rate and up 20% from a year ago. The increase included month-over-month jumps for single-family homes, which were up 18.7% to an annual rate of slightly more than 1 million, and multifamily homes, which were up 11.5% in the same period. It was also the highest number of new foundations laid since June 2022, when rising mortgage rates were starting to slow the market. Construction of new homes shot up dramatically to an annual pace of 1.56 million units, a 16% increase from the month before and well above the -0.1% drop that economists forecasted. When the Census released its May update on new home construction late last month, the results shocked even the most dedicated housing prognosticators. If builders continue to gain confidence, this could mark an inflection point in the long-running battle against America's housing shortage. But the tide appears to be turning again, as would-be sellers hunker down and buyers expand their searches beyond the existing pool of homes. The pain of the Great Recession continues to loom large in the minds of builders, and new construction plummeted when the Federal Reserve began hiking interest rates last spring. Homebuilding is typically a cyclical industry, following the ups and downs of the broader housing market. The contours of this building boom are still fuzzy since experts are eagerly awaiting more data and builders continue to battle higher borrowing rates as well as a labor shortage. For some wannabe buyers, one economist told me, new construction represents "the only game in town." Many builders are even dangling perks like cheaper loans or other discounts to ease the pain of higher mortgage rates. Not only are builders offering an alternative to the sluggish market for existing homes - it's clear that they're motivated to get newly built homes sold at a good price. With many homeowners reluctant to move, buyers are going to become increasingly reliant on new construction. And for renters, the historic number of newly built apartments on the horizon could start to bring down rents. Recent data shows that the number of groundbreakings is shooting up, and there are other signs that more homes could be on the way: Builders are selling houses at a faster clip and feeling optimistic again, surveys show, which is typically an indication that they're going to start laying more foundations. Finding a warm place to lay your head in the middle of the housing market's Ice Age is proving difficult.īut there may be one last hope for salvation for these hard-pressed homebuyers: brand-spanking new houses. People who already own a home aren't selling, mortgage rates are staying high, and competition for the few homes on the market remains stiff. Prospective homebuyers - especially those trying to purchase a home for the first time - are trapped. Account icon An icon in the shape of a person's head and shoulders.
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