The housing and residential construction trends in 2024 continue to evolve, presenting both challenges and opportunities. After a sluggish start in May, Belco’s aggregate volume sales are expected to align with internal forecasts, indicating a strong finish for the month. To stay relevant and optimized, let’s look at the latest data and trends shaping the market.
Regional Market Variations
At the end of April, Zonda mentioned in their Q2 Housing Market Forecast that the state of the market depends on the location, the product, and the builder. In reviewing the data this month, that observation holds true. According to the US Census New Residential Construction Data, on a year-over-year basis the starts and permit information still shows positive growth, while the month-over-month data tells different stories in different regions:
The South: Steady Growth
The South shows signs of stability with single-family starts nearly breaking even and permits increasing by 2% over the previous month. Despite a few setbacks, the region appears poised for continued production growth.
The West: Facing Slowdown
In contrast, the Western market is experiencing a slowdown. Single-family permits dropped by 5% after a 3% growth in starts, signaling a potential pause in activity. Reports indicate a major national builder has reduced starts projections in Texas for two months in a row. This same builder plans to hold off new starts in Denver for the next 30 days.
Mortgage Rates and Housing Affordability Challenges
Affordability remains a significant issue for prospective buyers. The Case-Shiller US National Home Price Index hit 316.646 in March, marking a 1% increase from February, a 2.03% rise since January, and a 6.49% increase from last year. Following a brief decline, the 30-year mortgage rate surged to 7.22%, the highest since November 2023.
According to Robert Dietz, Chief Economist at NAHB, “With a nationwide shortage of roughly 1.5 million homes, the lack of housing units is the primary cause of growing housing affordability challenges.” Additionally, the National Association of Homebuilders (NAHB) reports that nearly half of US households cannot afford a $250,000 home, exacerbating the affordability crisis:
Builder Confidence and Market Outlook
Builder confidence has taken a hit, with the index dropping 6 points to 45. The South saw a 5-point drop, while the West experienced a significant 12-point decline. This is the first decline since November 2023. Furthermore, builders report concern over single-family sales and increasing regulatory issues that could raise construction costs.
Residential Construction Trends: Challenges and Opportunities
Despite current challenges, the NAHB’s Executive Level forecast remains optimistic. Single-family starts are expected to exceed the 1,000,000 mark in 2024, with a revised forecast of 1,032,000 units, reflecting a 0.58% growth over last month’s forecast.
The market is expected to face ongoing difficulties before conditions improve. Freddie Mac’s April statement highlighted that “While housing demand is solid due to a large share of Millennial first-time homebuyers looking to buy homes, they are challenged by high mortgage rates and a lack of homes available for sale.” Belco Sr. Business Analyst Julie Bradley-Rowan notes that the Fed is still expected to cut rates later this year. She recommends keeping an eye on local markets and responding accordingly.
Conclusion
The 2024 housing and residential construction trends present a complex landscape, with regional variations, affordability challenges, and shifting builder confidence. By staying informed and responsive to market trends, industry stakeholders can navigate these challenges and capitalize on opportunities for growth.
