Home Agent Against The Odds, Some Buyers Are Returning To Newly Built Homes

Against The Odds, Some Buyers Are Returning To Newly Built Homes

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Homebuilders are reporting shorter construction timelines and fewer supply-chain issues as they deal with a drop in demand for new houses, according to a survey of homebuilders by John Burns Real Estate Consulting.

Homebuyers seeking to build their own home may soon find the construction process takes less time and money, a process that may have already begun to stabilize the reeling market for new houses.

A nationwide survey of homebuilders in August by John Burns Real Estate Consulting found that price cuts are beginning to work, providing a moderate boost to sales even as builders have finally had time to make progress on construction timelines.

Rick Palacios, the firm’s director of research, shared these insights and some select comments from builders on his Twitter account.

One of the key repeated takeaways from the survey is that the decline in new housing starts — while an unwelcome consequence of weakened demand — has started to provide some real breathing room for their strained supply chains.

Since the pandemic first began well over two years ago, there has barely been been enough construction materials to keep up with the demand for new homes. The issues have resulted in highly elevated — and volatile — prices for lumber, brick, cement and other materials that are essential for home construction.

Now those costs have started to come back down.

One builder in the Washington, D.C., area told the consulting firm they expect prices for material goods to come down even further in the months to come.

“Starts have declined drastically,” the builder said, according to Palacios. “The new environment is going to cause trades to drop their costs significantly and we expect that to make its way through all of [the] supply chain.”

The rebalancing market is also starting to ease existing shortages of construction labor, several builders told the firm.

“Most of our build cycle challenges are starting to ease,” one Kansas City builder said in the survey. “Subcontractors on the front end of the building process are starting to call and ask for work.”

While the easing supply-chain might in theory be welcome for builders, it’s come at the steep cost of worse sales numbers and lower revenue. Builders are still sitting on a lot of unsold inventory, a builder in Austin told the firm.

“August was a very poor month for sales across the board,” the Austin builder said, according to Palacios. “Cancellations spiked from July and buyers showed no sense of urgency.”

Still, a number of builders reported that their widespread practice of price reductions have begun to spark some new sales activity — perhaps with the help of occasional dips in mortgage rates that happened in early August.

In some markets, sales were already reaching a healthier place.

“Sales were fairly strong in August,” one builder reported in Charlotte, North Carolina. “Increased incentives to help with closing costs and a buy down rate appear to be helping.”

But in Phoenix, a market that was white-hot early in the pandemic and is cooling particularly quickly now, the survey identified stronger pessimism among some builders.

“Incentives continue to grow, with some communities pushing 20 percent in total discount packages,” one Phoenix builder said in the survey. “The positive is there’s light at the end of the tunnel for improving build cycle times. The negative is there won’t be customers on the other side of said tunnel.”

Email Daniel Houston

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