As of the date of this blog post shows, we are in the midst of a nationwide shutdown due to the COVID-19 virus. While Americans are home being responsible, it has also left time for families to discuss a myriad of topics and the condition of your home may have come up often. Within those discussions, building a new home may have come up, if you aren't in love with the idea of remodeling. Who wouldn't love a new home for their family, but is this the right time to build a new home?
While staying home and thinking about this myself, I started to review data and statistics about new home construction and I decided to examine the question, "What will happen to the new home construction market after this pandemic; for the rest of 2020?"
Starting my research on a national level, I found some interesting data concerning the statistics of new home construction with data from the U.S. Census Bureau. Yes, I just said the Census Bureau. Did you know that this bureau tracks new home construction data? It is called the Survey of Construction (SOC) and is provided with partial funding from the Department of Housing and Urban Development. The purpose of the Survey of Construction is to provide current national and regional statistics on starts, completions, and characteristics of new, privately-owned single-family and multifamily housing units and on sales of new single-family houses. The United States Code, Title 13, authorizes this survey and provides for voluntary responses. Its coverage is new, privately-owned residential buildings currently authorized by a building permit or started in areas not requiring a building permit. The data collected includes start date, completion date, sales date, sales price (single-family houses only), and physical characteristics of each housing unit, such as square footage and the number of bedrooms. The frequency of data is available monthly and annually for housing starts since 1959, for new home sales since 1963, and for completions since 1968. To learn more about this data visit: https://www.census.gov/construction/nrc/index.html.
In reviewing these surveys, I decided to examine data starting from the 4th Quarter of 2019 to the 1st Quarter of 2020 - specifically to reference the approximate time frame for the COVID-19 virus' existence (from what we know) - giving us a starting perspective to where this market may lead to for the rest of 2020.
The data shown in the images below, from October 2019 to December 2019, shows that on all points; building permits, housing starts, and housing completions, things stayed steady with slight increases ending the year on a high note. All strong numbers for each segment.
Now, looking at the 1st Quarter of 2020, January starts off strong with increased numbers in most categories from December. That is great news, but... January is also the month when the COVID-19 starts to affect a majority of the World. Heading into February, the number of building permits decreases - housing starts are steady - and the housing completions are showing positive from January.
As we near the end of April 2020, I predict that the analysts will be anxiously reviewing the data to give predictions of what the market holds. I'm sure you will see many articles written about what will happen, and one place to get a good understanding of this is to follow the National Association of Home Builders, NAHB. They have recently released an economic outlook where the following excerpt is quoted:
NAHB Chief Economist Robert Dietz provided the following economic outlook on April 10th, 2020: To read this article in its entirety, visit:
"Survey data from NAHB this week (April 10th, 2020) shows the degree to which housing demand and construction are being affected. Nearly all home builders (96% of survey respondents) are reporting declines in buyer traffic, with 72% of builders citing "major" declines. Other large impacts include:
87% of remodelers citing cancellations of existing improvement projects;
86% of builders noting delays with project approvals;
82% citing delays with engineering inspections; and
51% reporting declines in the ability to obtain new construction loan financing.
The NAHB/Wells Fargo Housing Market Index (HMI) will be published on April 15 and will provide the best measure of where the industry stands as a result of the virus and ongoing mitigation efforts. The HMI tracks regional sentiment, as well as traffic and future sales expectations. On April 16, Census data will provide estimates of housing starts in March; the figures are expected to serve as a barometer of the beginning of the economic slowdown.
In the coming months, we expect the economic data to be terrible, but we are also expecting a gradual improvement in the virus data. It is those data that are key to a re-opening of the economy. In the meantime, fiscal and monetary policy will be needed to provide a bridge to an eventual rebound and limit ongoing economic losses.
We will continue to update our outlook as more data become available. Further information can be accessed on NAHB’s Coronavirus Preparedness webpage." - end quote.
Let's just quickly touch upon the Wells Fargo Home Index that was mentioned by NAHB above. This index is an industry-standard of measure for the building industry and is updated often. The HMI offers an insider’s perspective on the current state of housing. The NAHB/Wells Fargo Housing Market Index (HMI) is based on a monthly survey of NAHB members designed to take the pulse of the single-family housing market. The survey asks respondents to rate market conditions for the sale of new homes at the present time and in the next six months as well as the traffic of prospective buyers of new homes. Each month, builder sentiment about the present and near-term housing market is depicted on a scale of 0 to 100, indicating the portion of builders experiencing positive market conditions.
To see this data in real-time, visit the link below. The image above shows data up to April 2020, where it doesn't take an expert to see the steep decline to Summer 2012 levels.
Wells Fargo Home Index
So, while we sit at home dreaming of a new home, we can't ignore what the market will look like for new home builders for the rest of 2020. What does it all mean for a new home buyer? It could mean an increase in the costs of building a new home with suppliers trying to catch up to the existing demand. It could mean that this market returns quickly with little downtime compared to the resale home market, which will show a decline in sales going into the summer. Truly only time will tell, but either way, our real estate market in Central Florida will continue to be strong as we move on from this pandemic.
If you find yourself with questions about new home construction and don't know where to start, don't hesitate to contact me to learn more about how I can help navigate the process as a real estate agent. I have strong connections with many Central Florida Home Builders - large and small - to guide you on where to start. If you don't want to build a new home, but want to buy a newly built home - I can help with this as well. Many builders build "spec homes" where they build a home prior to a buyer in place. You may or may not have a choice in your final selections, but there is always a way to personalize your home after purchase. Finding a home in the right location with the right floor plan will be your first priority. If you are curious about these types of homes, take a quick peek at this site to preview some newly built homes or ones that are under construction that are ready to purchase now! NEW HOME SEARCH
© Copyright 2020 Reinvest In Orlando - Theresa M. Kraa, REALTOR®, NHCB