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New-Home Buying Rush Likely to Continue in 2021
Dated: February 11 2021
More house hunters—particularly move-up buyers—are being drawn to new-home construction in the COVID-19 pandemic, so much so that it’s driving a surge in construction across the country.
Single-family starts ended 2020 with the best year in home building since the Great Recession, and 11% higher than 2019. Ultra-low mortgage rates and a shift in housing preferences—including a growing demand for larger spaces, home offices, and outdoor amenities—are driving the increase, said Robert Dietz, chief economist of the National Association of Home Builders, at a press conference Tuesday during the virtual 2021 International Builders’ Show.
Dietz says new-home construction will likely grow by 5% during 2021 and hit above 1 million housing starts for the first time in years. But building can only go so far in meeting the surge in buyer demand since the pandemic, added David Berson, chief economist for Nationwide Mutual. Existing-home sale inventories have been at record lows as homeowners delay selling due to the pandemic. Berson said that as the COVID-19 vaccine becomes more available and the economy improves, he predicts that more homeowners—realizing the equity gains in their homes—will list their existing homes and that could help alleviate some housing shortages. Economists on Tuesday predicted that both existing- and new-home sales will be higher in 2021 due to the rise in buyer demand.
Builders, however, are concerned about several challenges that could affect sales over the next few months, particularly related to rising construction costs. Lumber prices, up 169% since mid-April, are significantly adding to the costs of building a new home. Buyers are seeing the increases in home prices too: A median of $16,000 has been added to the cost of a newly built home from the increase in lumber prices alone, according to the National Association of Home Builders’ data.
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