Will new construction impact the housing market in 2024? The short answer is yes! New construction will continue to drive many aspects of the housing market next year. From creating much-needed inventory to having some of the best mortgage rates around, you can’t ignore this segment of the market. In 2023, 30% of sales were new construction!
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How this will impact YOU in 2024:
1. You need more homes to show your highly qualified, highly motivated buyer clients. Many of those clients are also your sellers or would-be sellers. Knowing about new construction will allow you to sell more homes in less time, not to mention the repeat and referral business down the road because you solved the problem of finding your clients the right home.
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2. Builders, especially the large ones offer better mortgage interest rates, which means lower payments for a new home. No repairs and a smaller payment make most buyers pretty happy. New construction virtually sells itself.
3. When you have builder relationships, those can lead to many, many more opportunities for you. Refer to our podcast about how to make money with New Constructions. There are at least 7 different ways.
Quick facts from the US Census regarding New Construction
Keep in mind that we currently have 560,000 resale homes on the market as active listings. Inventory is inching up, week by week, but let’s see what’s happening in the world of new builds.
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- Those new projects are valued at more than $154 billion, or an average valuation of $289,339.57 per permit. Note: This valuation is an estimate of the cost to BUILD the home for the builder, not including the purchase price of the land, and is not the same as the market value of the home.
- 60% of those permits are for single-family homes, and 40% are for multi-family homes.
- Greater Houston, Dallas-Fort Worth, Atlanta, Phoenix, and Charlotte lead the nation in single-family home permits issued in 2023.
- The South leads the nation in both the number and total valuation of single-unit permits issued so far in 2023, followed by the West and Midwest regions.
- Orlando, Austin, Nashville, Tampa, Raleigh, Riverside CA, Greater NYC, Jacksonville, FL, Washington DC, and LA are all on the list of top 20 cities for residential building permits. So chances are, there’s new construction near you.
- You can find SOME new construction in your MLS but don’t count on that as your only resource. Use NewHomeSource.com and search by zip code to find out what’s happening in your market. You can also network with your local zoning commission, architectural review board, etc.
- NOT Knowing about new construction can mean that you’ll do 30% less business next year because it’s 30% of what’s happening out there!
- Inflation. 2024 Should be a year of normalized, moderate inflation, but won’t be a market-wrecking factor as was once predicted.
- According to JP Morgan: “As expected, year-on-year headline inflation fell from 3.7% in September to 3.2% in October on the back of a 2.5% decline in energy prices,” said Shawn Snyder, Global Investment Strategist for J.P. Morgan Wealth Management. “Gasoline prices dropped by 5% during the month, providing the consumer some needed relief.
- It seems that inflation is here to stay, but has slowed for the time being. It could also be that we’re all just getting used to higher prices. Don’t forget that if you (and your many past clients and friends) own a home, you have benefitted from inflation as well.
- You might think that higher prices would cool consumer spending, but no…check out these stats from Black Friday and the 5 days from Thanksgiving to Cyber Monday: Americans spent $38 Billion just online. That’s up almost 10% from last year, and surveys reflect that most shoppers are only halfway done with their holiday shopping.
- Sales Volume. Will we see more sales in 2024?
A ‘typical’ year is around 5 to 5.5 million sales. 2023 will go down as a record low number of sales, predicted to close out around 4.7 million sales. This second only to the epic low level of sales in 2009, which clocked in at only 4.34 million sales. At the height of the pandemic market, 2021 there were 6.2 million sales.
It’s too soon to tell exactly how much better the sales volume will be in 2024 and 2025, but it certainly bounce back from this super low level, as the 6 to 6.5% mortgage interest rates become normal and acceptable, inventory improves and new construction fills in the gaps in many markets.
Demand is clearly strong enough to fuel increased velocity. You’ll see more buyers and sellers entering the market in 2024. The traditional seller is almost always also a buyer.
There were 5% more sales this week than a year ago the same week. This is hopefully a trend, especially since we’re seeing this at a typically very slow time of year for sales.
- We are enthusiastic that the bottom has occured in sales volume and the peak has happened with interest rates. It all looks positive going into 2024, the only question is how quickly the pace will pick up.
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