New home construction stops – bad news for the housing market



At a time when there is such a high demand for homes, one would think that new construction will grow rapidly. But in reality, new home construction is declining.

Single-family home construction fell more than 13% in April compared to March, according to the US Census. This is the sharpest decline since April 2020, when the pandemic was new and almost the entire economy was forced to stop overnight.

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Why is housing construction stopped?

Big reason building a new house the slowdown is due to rising material costs. For example, lumber was in short supply during the pandemic, which in turn led to a sharp increase in prices for them. Steel and copper prices also rose, making new construction more expensive. And while home builders have the opportunity to pass these costs onto buyers, some may not want to bite.

A shortage of skilled labor has also led to a decline in construction. In fact, many industries are struggling right now, so in some states stopped the rise in unemployment

What’s going on with the housing market?

Right now there is record low number of affordable homes in the housing market. This combined with extremely competitive mortgage rates, stimulates consumer demand. Thus, home prices have skyrocketed over the past few months, making it difficult for potential buyers to become property owners. If new home construction continues to slow, it could narrow the already tense housing market, providing buyers with fewer options and further pushing up home prices.

To be clear, new construction is not necessarily a viable alternative to buying an existing home. The rise in the cost of building materials makes new buildings are more expensive than ever. But still, there are supplies in new houses, and at such times this is very important.

Will the construction of new houses start soon?

Whether or not new home construction starts in the coming months will depend on many factors, the most important of which are perhaps the cost and availability of building materials. But given the way things look right now, frustrated buyers in today’s market may want to relax and pause their search for homes.

There isn’t a lot of inventory available right now, and waiting can make the experience less stressful. The good news is that mortgage rates are expected to remain low for some time, so waiting to buy doesn’t necessarily mean you get stuck in the worst deal for that matter.

What’s more, the severity of the hurricane season could also affect new home construction in the coming months. There is really no way to predict whether new construction will continue to decline or not, but buyers may want to act on the assumption that newly built homes will be largely de-listed in the near future, both due to a slowdown in construction and and the price tag is involved.


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