KC Homebuilders Aren't Overbuilding, They're Catching Up

Did you know that more brand-new homes are available in Kansas City now than usual? In fact, about one in three homes on the market are newly built. If you're wondering what this means for the housing market and your move, here's what you need to know.

Why This Isn't Like 2008
It's important to remember what happened to the housing market in 2008. One contributing factor to that crash was the oversupply of homes for sale. While not all of the oversupply came from builders, it has left some people feeling uneasy about the increase in new home construction.

However, this year's data shows no need to worry. Builders are not overbuilding; they are simply catching up. The graph below, which uses Census data, illustrates the number of new houses built over the last 52 years. After the crash in 2008, there was a long period of underbuilding (shown in red). It wasn't until recently that we finally met the long-term average for the number of homes built in a typical year.

The above data indicates that despite the recent increase in new builds, there won't suddenly be an oversupply of homes for sale. There's still a significant gap to make up after over a decade of underbuilding. And if you're concerned that builders are overdoing it, here's something else that should be reassuring.

New Home Construction May Be at Its Peak for the Year
The most recent Census data on housing starts (homes where builders have just begun construction) and permits (homes where builders can begin development soon) shows that builders are slowing down their pace. Why is that?
They are responding to the still-high mortgage rates and how they affect buyer demand. They are appropriately pulling back in response to what's happening in the market. An article from HousingWire explains, "Even with a massive housing shortage across the nation, homebuilders are completing their pipelines and not seeking as many permits to construct new single-family houses."

Builders remember what happened when they overbuilt during the crash and want to avoid repeating that, so they're being cautious and pulling back a bit.

You May Have More Options Now Versus Later
If you're considering buying a newly built home, here's what you need to know. Builders are obtaining fewer permits and starting construction on fewer new homes, which means we may be at the peak of new home construction for the year. This doesn't mean that new home construction is coming to a halt, but the pace is slowing down, affecting what will be available later this year. According to Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), "Given the recent declines in housing starts, home completions will steadily show declines in about six months."

If you're ready to buy now, you might have more newly built options to choose from than later, which could be an excellent reason to start your search now. We are Kansas City real estate market experts and provide valuable insights into builder reputations and other essential factors specific to the local market and your needs.

Bottom Line
While it's true that new home construction comprises a larger share of the market than usual, that isn't necessarily a negative trend. Builders aren't overbuilding; they are simply responding to market demand to prevent a repeat of the mistakes made in 2008.

If you are interested in purchasing a new home while options are plentiful, get in touch via our website or call/text the Just Say Home KC team at 816-656-2816.

Post a Comment