Daily Local News (West Chester, PA)
New construction should help real estate market rebound
As we look at trends forming, new construction appears to be one of the keys to help improve the inventory shortage as well as first time home buyers with dwindling prospects. A recent ERA Real Estate broker survey report by Charlie Young outlines how new construction is starting to increase to meet demand.
“New home starts are on the rise thanks to loosening of lending for developers,” says Young. “However, new home starts are not keeping up with demand, so increased land purchases may be related to private custom home builds.”
With this expansion in the new construction wing, hopes are first-time home buyers will begin to make a comeback as new developments make entry level price points possible.
Home builders have been slow to start large developments in the wake of the housing crash, but Jonathan Smoke, chief economist for Realtor.com predicts total sales for existing and new homes will reach six million for the first time since 2006. The economy is expected to grow some 2.5 percent next year and continue to produce new jobs. On the downside, it’s still hard to qualify for a mortgage and home prices continue to go up.
Existing home sales and
prices are expected to slow to 3 percent year-overyear due to higher mortgage rates, continuing tight credit standards, and lower affordability. But the new construction market is expected to see more significant gains in the coming year as new home
starts increase 12 percent year-over-year and new home sales grow 16 percent over 2015.
Smoke notes that “moderate gains in existing prices and sales, versus the accelerated growth we’ve seen in previous years, indicate that we are entering a normal, but healthy housing market.” He also predicts that “the improvements we’ve seen over the last few years have enabled
a recovery in the existing home market, but we still need to make up ground in new construction, which we could begin to see in 2016.”
Who will be looking to purchase these new homes coming to market? Smoke’s research indicates that Millennials, Gen-Xers and downsizing retirees will be likely candidates.
Because Millennials currently make up about
30 percent of the existing home market, they are expected to drive the demand. With Millennial incomes on the rise, they will seek out homes that meet the needs of their growing families, placing high value on safe neighborhoods and quality construction.
Gen-Xers, having rebounded from financial crisis and entering their prime family-raising and earning years will be looking
to sell their existing homes and move up to a new neighborhood.
Rounding out the third new construction buyer, retirees are likely to be one of the largest buyers, seeking to downsize square footage and cost of living. Smoke says you can look for their current homes to hit the market this spring as they look for 55+ and maintenance free communities.
Maureen Hughes is the Lead Listing Specialist of The Wayne Megill Real Estate Team of Keller Williams Brandywine Valley in West Chester, Pa. For buyer or seller representation, or for more perspective on the local and national real estate market, please email maureenhughes@kw.com and visit The Wayne Megill Team site at www.waynemegillteam.com.