Is New Home Construction Back For 2023?

  • 2 min read

Is home-building making a comeback? Home builders’ and contractors’ sentiment has increased for the first time in over a year. Diane Olak over at CNBC has a great article about this. She attributes the increase to lower mortgage rates, which is part of the reason, but there’s more to it. Builders and buyers realize that even with higher prices, people still need to buy houses. Real estate prices have increased dramatically in the last two to three years, with the average price of a new home well into the $400,000 range. In many markets, you’re spending six or seven hundred thousand dollars on getting a decent house, making mortgage payments of five or six grand a month at 7% interest. This is filtering some people out, but builders, buyers, and realtors are finding that people still need to buy homes, and there is still a shortage of homes. 

Builders are cautiously optimistic about being in the building and development game, and realtors are seeing fewer sales volume, but there’s still pent-up demand from buyers. As soon as buyers start to catch their breath and see that the market’s not crashing and prices aren’t collapsing, they’re starting to be more optimistic about buying a house. A 10% reduction in real estate home prices is expected, which is just a correction of exuberance, but it won’t crash prices down to 2018 or 2017 levels. Prices won’t crash until both buyers and sellers are willing to agree to it, and most sellers aren’t in a position where they have to crash their prices. As buyers start to see that prices aren’t collapsing, they’re stepping back into the market, and home builders are also stepping back into the market. 

As a contractor, let us know what you think. What do you see for prices in your area? Is there a stalemate where buyers don’t want to buy, but sellers don’t want to discount their homes? How is that affecting builders in terms of building spec homes or doing major construction of subdivisions?

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