Homebuilders offer buyers options unavailable through existing-home sales markets.
Newly built homes account for only 10% of home sales market, but builders have increased this percentage considerably this year and expect further gains by 2024. Even with higher mortgage rates, new-home sales are on the rise due to builders releasing more inventory into the market than they were prior to COVID-19 pandemic. Conversely, existing homes market is stagnating due to reduced availability; inventory levels have decreased by about half what they were in 2019. After two consecutive years of nearly 20% declines, existing home sales will experience a rebound next year with an expected baseline gain of 10% to 15%. Should more inventory materialize suddenly, unexpected gains of 25% to 30% could become possible; such scenarios show how important inventory can be in driving sales forward.
Builders can increase inventory through new home construction, while existing-home owners must let go of low mortgage rates secured two or three years ago, such as 2.5%-3% rates secured during that time. That may seem too tempting for some owners; but considering all that has taken place over recent two years – 3 million marriages, 1.5 million divorces, 7 million births, 4 million deaths and 7 million Americans reaching 65 – staying put may no longer be an option for growing families or divorcing couples; people need and want to move – even small drops in mortgage rates could entice people enough.
Since 2014, 4 million net new jobs and 50 million job switches have been created, providing office workers with opportunities that accommodate hybrid work policies.
Pent-up supplies have steadily been rising. When combined with lower interest rates, they should create an even more dynamic housing sales market.
