There’s no question that the U.S. housing market is facing challenges. With the average 30-year, fixed-rate mortgage hitting 7.09% – the highest level for more than 20 years – analysts expect sluggish conditions within the real estate market to continue into 2024 and beyond.
However, there are a few bright spots in the overwhelmingly gloomy data from the industry. For instance, building permits jumped 6.9% last month to over 1.5 million nationally, the highest in ten months. This growth in permits issued suggests that builders respond to the demand for new homes.
But what are the factors driving this growth despite economic headwinds? Why are new homes bucking the prevailing conditions and providing much-needed resilience? Here’s a look at the reasons behind the stellar performance.
New Homes Meeting Post-Pandemic Shift in Consumer Preferences
There’s been an unmistakable shift in the last few years regarding what buyers need from their homes. And those shifts in preferences have been left unmet by existing housing stock.
The pandemic and rise of remote work have undoubtedly played into this. For instance, a study room or dedicated home office is now high on the hit list for prospective home buyers. Outdoor space and access to nature are also high on the priority list after being restricted on movement for large portions of the last few years.
Another trend boosted by the pandemic is the need for more space in general. Buyers are looking for larger plots (rather than multi-family-style developments) and are pursuing homes with modern open floor plans that offer more flexibility.
Limited Housing Stock Pushing Buyers Toward New Homes
Another simple but unavoidable factor at play is basic supply and demand. America is currently facing a generational housing shortage, with some sources placing the shortfall of supply at 6.5 million homes.
In short, while there’s no question that new homes offer distinct advantages over existing ones, there’s very little choice in some areas of the country. Prospective buyers (often first-time buyers) are pushed toward new constructions because they have greater availability and can better meet their needs.
New home builders, including Terrata Homes, further incentivize buyers by offering immediate-move-in homes. These homes are already built with a range of brand-new, high-end upgrades included, and the keys can be secured in as little as 30 to 45 days. In short, they’ve eliminated the associated waits with new construction homes while delivering all the benefits.
New Homes are Often Constructed in Well-Equipped and Close-Knit Communities
Buyers are still flocking to newly-build homes despite economic uncertainty because they offer much more than a home. In many ways, they offer a lifestyle. New construction homes often form part of master-planned communities, where every detail has been carefully considered. Amenities such as clubhouses, parks, swimming pools, sports facilities, and other green spaces have all been factored into the design of these communities.
With community events also a feature, buyers essentially purchase their space in a “village,” where tight-knit relationships are formed and many of their fundamental needs are met with facilities right on the doorstep.
Aside from these homes being built to modern standards, the communities they form a part of are well-thought-out and deliver a higher quality of life than within existing neighborhoods constructed decades ago.
New Homes Appeal with Modern Conveniences and Integrated Designs
What often keeps new home demand high is that they are built with the latest advances in construction materials and techniques and often feature integrated technology that helps future-proof buyers’ investments.
Energy efficiency through enhanced insulation and low-energy appliances is one of many advantages new homes can offer buyers. Smart home technology, solar panels, and other innovative installations included as standard often make purchasing a brand-new home a no-brainer.
What’s crucial about these innovations is that they are so often difficult and expensive to retrofit to an existing home. Many buyers ask themselves why they will need work and renovations in the near term when they can purchase a property (often in the same price bracket) that includes everything in brand-new condition and ready to evolve with a technology-led future.
Urban Migration Trends Driving Up Demand for New Homes
As mentioned, space is at the top of many people’s priority lists these days. That’s not something many existing urban homes can provide. With the rise in remote and hybrid workplaces, living in central areas within towns and cities is no longer necessary.
These changes drive a noticeable trend in couples and families migrating out of cities and toward more suburban and rural settings. Not only does this often deliver a higher quality of life, but homebuyers’ dollars tend to stretch further once they breach city limits. With less needed in the way of finance and mortgages, buyers can secure their dream homes with affordable monthly payments.
This migration is fueling demand in areas previously less explored by homebuyers – those often greenlighted for developing master-planned new home communities. This crossover in the desire for a quieter rural life with increasing developments on the city outskirts is proving successful for new home builders.
New Homes Providing Silver Lining to Dark clouds Over Us Housing Market
While the broader trends with the housing market are less than rosy in the wake of the rising cost of living, higher interest rates, and increasing inflation, new homes are providing a much-needed shot for the industry.
With various factors, including move-in-ready status, desirable communities and locations, and modern home designs driving up demand, those in the residential construction industry remain hopeful for 2024 and beyond.
The only question remaining is whether new home builders can bridge the sizable housing shortfall over the next few years. Early figures are promising, but only time will tell regarding their progress in constructing the millions of new homes required.
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