Hopeful Signs for Homebuyers as Housing Starts Surge in November Amidst Challenging Market Conditions
Despite a tumultuous year for homebuyers marked by high mortgage rates, soaring home prices, and limited supply, a glimmer of hope emerges as housing starts spiked to a six-month high in November. The U.S. Census Bureau and the U.S. Department of Housing and Urban Development reported a 14.8% increase in new home starts, with single-family housing starts rising by 18%. While this surge is seen as a positive development, challenges persist in addressing the nation’s housing crisis.
Positive Trends in November: November witnessed a noteworthy surge in residential construction activity, primarily driven by increased single-family building. Lisa Sturtevant, Chief Economist at Bright MLS, noted that the number of new single-family homes under construction rose by over 40% compared to the previous year. However, the multifamily home starts experienced a decline of 33.7% compared to the same period a year ago.
Insufficient to Solve Housing Crisis: While the spike in housing starts is a welcome trend for homebuyers entering 2024, experts caution that it is not enough to resolve the nation’s housing crisis. Existing-home sales plummeted by 15% in September year-over-year, reaching the lowest figure in over a decade, according to the National Association of Realtors (NAR). Sturtevant emphasized that despite the increase in November, the housing shortfall ranges from three to six million units, contributing to rising rents and home prices that remain unaffordable for many.
Market Analysts and Economists Weigh In: Leading economists express varying degrees of optimism regarding the surge in new construction. Lawrence Yun, Chief Economist at the National Association of Realtors, acknowledges that more homebuilding is needed, and a 30% rise in home construction could be absorbed in the marketplace. However, experts, including Odeta Kushi, Deputy Chief Economist at First American, caution that the country remains “meaningfully underbuilt,” estimating a shortage of 3.5 million to 5.5 million housing units.
Factors Influencing the Market: The new home market continues to outperform the existing home market, driven in part by current homeowners holding onto their homes due to the “lock-in effect” and the appeal of below-market mortgage rates. Homebuilders are offering incentives and discounts, including mortgage rate buydowns and coverage of closing costs, to maintain the strength of the new home market. Lower mortgage rates, dropping from 7.34% to 6.64% in the past month, contribute to increased affordability.
Home Price Trends: In addition to the surge in new construction, there is a slowdown in the rise of home prices for the third straight month in November. According to Redfin, home prices rose by 0.6% from the previous month, marking the smallest increase since June. The median sale price for houses in the U.S. is reported to be $431,000 as of the third quarter of this year, reflecting a nearly 28% increase from the same period in 2020.
Conclusion: While the surge in housing starts brings a ray of hope for homebuyers, the challenges posed by the housing crisis remain significant. The gap between supply and demand persists, and further concerted efforts are required to address the shortfall in housing units. The dynamics of the real estate market, influenced by economic factors and incentives, continue to shape the housing landscape as the industry navigates the complexities of affordability and availability.
