Things are looking on the up and up for builders and new home construction!Another positive sign from the real estate market comes this time from new construction and builders who expect a five point increase in the builder market this November, bringing the record to 90 points, for the third consecutive record breaking month.Each month, the NAHB/Wells Fargo Housing Market Index (HMI) calculates points to predict the housing market. This month, the number for new home builds increased by five points, from the 85 set in October.So what’s to thank for the ongoing rise in new construction? Many experts put the rise in new construction down to historically low mortgage rates and the desire to move to less populated, more suburban neighborhoods due to COVID-19. The demand for this lifestyle is significantly higher, with NAHB Chairman Chuck Fowke reporting a nearly 17% increase in new home sales year-over-year. The Challenges Ahead for BuildersAs more and more home buyers and families continue to flock to new construction homes, many builders and developers continue to sign mass contracts. Builders should be aware of demand for lots and materials that could hold back the building process in the near future. Fowke explains that regulatory policy risks and supply-side constraints may be the largest future challenges to builders. New Home Builds & CoronavirusJust as Coronavirus and quarantine triggered the shift to a suburban ideal, the latest vaccine news could slow things down. While, right now, the housing market is a spotlight for the economy, affordability is a growing concern as more families move to homes with a lower resale value once things return to normal. This shift however in the current time promotes new home builds and continues to increase the housing market. In short, we can expect this to not be a long term trend. New Home Builds & The ElectionAnother potential factor in future home numbers is the election. It’s important to note that many of the numbers for the month of November were submitted prior to Election Day. The election itself is likely to have a slight effect on December’s numbers. What is the NAHB/Wells Fargo Housing Market Index?Each month, a survey conducted by NAHB called the NAHB/Wells Fargo Housing Market Index determines builder perceptions of current single-family home sales and sales expectations for the next six months. The rating is “good,” “fair,” or “poor.” The survey also collects information on prospective buyers. Scores are used to calculate a seasonally adjusted index from these results. Any number above 50 indicates that more builders view the conditions as good than poor. The survey has been conducted for 35 years.
