At the end of June 2023, the latest economic reports saw housing starts surge. Now, this presents a positive development that aims to combat the scarcity of existing homes for sale.
The Housing Market’s Response
Despite a slight increase in existing home sales from April to May, these figures still lag significantly behind last year’s numbers, down by 20%. Furthermore, the inventory levels remain alarmingly low, with only a 3.0-month supply available nationally, far below the balanced market standard of six months.
The shortage of existing homes is notably pronounced, with the current supply approximately half of what it was before the pandemic hit in 2019. However, the median existing-home price has experienced a 3% decline compared to the previous year, showing signs of stabilization after reaching a record high in June 2022.
Housing Starts Surge 22% from April to May 2023
Amidst the scarcity of homes for sale, there is a glimmer of hope in the form of heightened construction activity. Housing starts experienced a substantial surge, skyrocketing by an impressive 22% from April to May, surpassing expectations and reaching the highest level since April 2022.
This surge is a direct response from builders to address the severe shortage of previously owned homes on the market. Additionally, building permits, a leading indicator for new construction, rose by 5% from the previous month.
Builders Overcoming Obstacles as Housing Starts Surge
Builders are stepping up their efforts to meet the demand for new homes, accounting for approximately 35% of sales—an increase from the pre-pandemic range of 10% to 15%. However, they continue to face challenges, including tight credit conditions for construction loans and elevated costs of land, labor, and materials.
Despite these obstacles, builders are resilient and determined to fuel new construction, providing prospective homeowners with more options in the market.
Strong Construction Activity Offers New Hope for Homebuyers
While mortgage markets remained relatively quiet, the housing sector witnessed a surge in housing starts, which serves as a positive response to the scarcity of homes available for sale. The increase in construction activity offers hope for homebuyers, as builders endeavor to provide new housing options amidst challenging circumstances.
As the industry continues to grapple with credit conditions and rising costs, it remains imperative to monitor these developments, which shape the dynamics of the housing market. For more information on the Chicagoland real estate market, contact the title and escrow specialists at Plymouth Title Guaranty!
Information accredited to MBSQuoteline.