The housing market in the United States is seeing a surge in the construction of new single-family homes. According to data from the U.S. Census Bureau, single-family housing starts increased by 18 percent in November compared to October. This rise is attributed to a severe lack of existing inventory on the market, which has continued to fuel demand and construction activity in the housing sector.
Thomas Ryan, a property economist at Capital Economics, noted that single-family housing starts jumped to their highest level in 18 months. This surge has been driven by a slowdown in building permit issuance in recent months and the stabilization of new home sales. Despite this, the big picture indicates that housing starts are likely to remain strong due to falling mortgage rates and tight inventory.
Data from the National Association of Realtors (NAR) shows that the housing supply has been low throughout the year, with only 3.5 months of inventory available for sale at the current pace of sales. This is far lower than the five to six months of inventory typically required for a balanced market, tipping the market in favor of sellers.
The Mortgage Bankers Association’s chief economist, Mike Fratantoni, highlighted that lending for new construction has been a bright spot in the housing market, with applications to purchase a new home up 22 percent compared to last year. He also noted the increasing share of Federal Housing Administration (FHA) loans in new construction mortgages, indicating that first-time buyers remain a strong force in the market.
As home builders ramp up production, more supply is expected to reach the market, leading to a potentially significant increase in home construction. This can help moderate home price appreciation, especially in light of the recent plunge in mortgage rates.
Freddie Mac data shows that the 30-year fixed-rate mortgage averaged 6.67 percent for the week ending Dec. 20, down by over a percentage point from its recent peak, remaining below 7 percent for the second week in a row. Experts anticipate that the consecutive fall in mortgage rates will encourage buyers and potentially lead to an early start to the homebuying season.
Looking ahead to the housing market in 2024, real estate brokerage Redfin expects inventories to pick up, home prices to decline, and mortgage rates to ease down, giving homebuyers a much-needed break from elevated housing costs. The brokerage projects that mortgage rates will remain well above pandemic-era record lows but will decline throughout 2024, hitting 6.6 percent by the end of the year.
In conclusion, the housing market in the United States is experiencing a surge in new construction amid low inventory and falling mortgage rates. This trend is expected to continue into 2024, providing some relief to homebuyers in the form of increased supply and declining home prices.
