In the current residential construction market, experts emphasize a straightforward solution to the uncertainty from prior months: increase housing construction. This month’s Belco bulletin reflects on data from the last few months, and current indicators for the industry.
NAHB Insights: Build More Now
NAHB Chief Economist Robert Dietz stresses, “Building more housing is key to easing inflation.” According to recent NAHB releases, the nation remains underbuilt by 1.5 million units, highlighting the urgency to boost supply. This move not only addresses inflation but also enhances affordability by restoring equilibrium to supply and demand. Additionally, despite a 5% year-over-year increase, the median home price dipped to $310,668 in December, hinting at improved affordability. This trend may encourage previously hesitant buyers to reenter the market soon.
Single Family Starts: Signals of Growth
Although overall housing starts declined in January, permits show a steady rise, especially in single-family (SF) homes. SF permits surged 1.6% nationally, reaching the highest level since May 2022. This signals continued growth in the new residential construction market.
Builder Confidence on the Rise
Builder confidence rose for the third consecutive month, with the South hitting the 50-point mark and the West climbing nine points to 47. Factors such as stabilizing mortgage rates, anticipated Fed Reserve rate adjustments, and limited existing inventory contribute to this increasing optimism. The NAHB maintains its Executive Level Forecast, projecting 988 thousand starts for 2024, with a 4.71% growth over 2023. This consistent outlook reflects confidence in the market’s trajectory.
Residential Review
January existing home sales rose 3.1% month over month to a rate of 4 million, the best level since August 2023. However sales fell 1.7% year over year. Furthermore, despite high rates, home prices rose 5.1% in January year over year to $379,100, the highest January price ever. The most encouraging news is while still painfully low, inventory is up and new listings rose for the fourth straight month.
Conclusion
With concerted efforts to boost housing supply, address affordability concerns, and capitalize on builder and buyer optimism, the residential construction market may be looking up. The Belco team works diligently to synergize expert data and market indicators in order to ensure relational longevity and inventory confidence with our trade partners. It is encouraging that the residential construction market shows some promising signs of growth and stability.
