Just like the summer weather, demand for new homes is hotter than ever.
Even as we begin to return to normal after the effects of the COVID-19 pandemic, people are still wanting to better their living situation. As Chris Igou of Daily Wealth puts it:
“People are fleeing big cities for places with no sales tax, warmer weather, and more bang for their buck. That trend was already underway. And the pandemic scared even more people away from crowded cities and into the suburbs.”
Current Inventory Levels
Although the desire to own a home is higher than ever, supply just can’t keep up. According to the Existing Home Sales Report from the National Association of Realtors (NAR):
“Unsold inventory sits at a 2.4-month supply at the current sales pace, slightly up from March’s 2.1-month supply and down from the 4.0-month supply record in April 2020. These numbers continue to represent near-record lows.”
This means that if no new homes were listed starting today, the current inventory would be totally sold out in just 2.4-months. The graph below illustrates just how far below normal we currently are.
A Construction Boom Could Be the Answer
Demand for new home construction is increasing dramatically according to Lawrence Yun, chief economist of the National Association of REALTORS® (NAR):
“New-home construction activity soared to its highest level in over a decade, which is fantastic news as more housing inventory will be available as the year proceeds.”
One of the biggest obstacles to complete construction is the price of lumber. Luckily, prices are beginning to come down. The NASDAQ commodities exchange shows that the lumber prices have been falling steadily since reaching record highs on May 7, 2021. Projections for July show that the price will be about 40% lower. This will help fuel more home building and completion rates.
While improvements could be on the way, homes are still selling faster than ever. Regarding existing home sales, Sabrina Speianu, Senior Economic Research Analyst at realtor.com, explains:
“In May, newly listed homes grew by 5.4% on a year-over-year basis compared to the earlier days of the COVID-19 pandemic last year… This is a reflection of quickly selling homes and, for buyers, it means that while they can expect fresh new listings every week, they will have to be prepared to move quickly on desirable homes.”
Make sure you are ready when you find your dream home by talking to one of our mortgage advisors.