By AnnaMaria Andriotis
New data shows the number of new single-family homes being built is on the rise. Should buyers come knocking this spring?
The number of single-family homes under construction increased 4% in December to a seasonally adjusted annual rate of 470,000, according to figures released this morning by the Commerce Department. That’s the highest level since April 2010 and up 12% above a year prior. Housing experts say home builders are expressing cautious optimism as employment begins to improve in some pockets of the country and as buyers begin to express more interest in new homes.
Indeed, home builders say demand for single-family homes is picking up again. “Builders are beginning to see more activity in their sales offices – an indication that the environment will continue to improve in selected markets,” says David Crowe, chief economist at the National Association of Home Builders. Builder confidence for newly built, single-family homes rose for the fourth consecutive month in January to its highest level since June 2007, according to the NAHB/Wells Fargo Housing Market Index released on Wednesday. The demand comes largely from cities that haven’t seen massive declines in home values or a glut of foreclosures, whose lower prices tend to hurt new home sales, says Crowe.
But experts say Mother Nature is also giving home builders a hand. Favorable weather conditions in some regions of the country are contributing to a growth in single-family home starts, says Jack McCabe, an independent housing analyst in Deerfield Beach, Fla. Fewer snowstorms means home builders can get started on new properties earlier in order for them to be near ready (or finished) come spring and summer — the peak home buying seasons, he says. The Northeast, which has seen less snowfall so far this winter, registered the biggest increase in NAHB’s report yesterday.
For would-be buyers, there are still incentives for purchasing new homes. To begin with, these homes tend to be turn-key ready, meaning home buyers shouldn’t have to shell out money for repairs, says Crowe. And builders are still willing to negotiate the purchasing price or closing costs or to provide upgrades, he says. That’s because housing starts – while improving – are still way off their normal pace. In a healthy market, the total number of new single family homes that start being built per year should be at 1.5 million. Going forward, builder expectations might have to adjust for a new reality, says McCabe. He expects the new normal to be lower – at around 750,000 to 1 million – but not before 2014.