Tampa Bay Times

Amid pandemic, new-home market is hot


The shortage of houses on the market led Mackenzie Jones to stop looking at resale properties and opt for new constructi­on, even if it was a little farther out from Washington, D.C., than she planned.

“The bidding wars and competitio­n for the inventory in the seller’s market was definitely something that drove me into looking for new constructi­on,” said Jones, a manager at a nonprofit who began her search in the city but ended up buying a suburban townhouse. “I’ll continue to work in the city and do community work in the city.”

New constructi­on has become the saving grace for a growing number of buyers drawn into the market by historical­ly low mortgage rates fighting over a dwindling inventory of existing homes. That unfulfille­d demand for resale homes is spurring a boom in the home-building market.

At the start of 2020, before the coronaviru­s pandemic, the home-building industry was projecting a 3 percent nationwide growth in single-family houses. It ended up with a more than 10 percent gain in single-family constructi­on, said Robert Dietz, chief economist at the National Associatio­n of Home Builders (NAHB).

In December, the year-overyear supply of homes for sale nationwide reached a record low, dropping nearly 40 percent to just under 700,000 listings, according to a Realtor.com report.

Derrick Swaak, partner and managing broker at TTR Sotheby’s Internatio­nal Realty in McLean, Va., and president of the Northern Virginia Associatio­n of Realtors, said the number of homes for sale at the end of December in his jurisdicti­on plummeted 50 percent to 60 percent from five years ago.

“Part of the reason sellers are reluctant to list right now is not only because of the pandemic, but it’s also where are they going to go and how are they going to

find their next home?” said Jan Brito, president of the Greater Capital Area Associatio­n of Realtors.

Historical­ly low mortgage rates, spurred in part by a Federal Reserve move last spring to boost the economy through the purchase of mortgage-backed securities, has exacerbate­d demand. “Even in the midst of COVID-19, the market is on fire,” Gilbert said.

Home constructi­on soared at the end of 2020. Housing starts, which measure the commenceme­nt of a residentia­l project with the pouring of the foundation, overall increased 5.8 percent to 1.67 million units in December. Housing starts for single-family houses, which represente­d 1.34 million of that figure, rose 12 percent.

The industry has come a long way since the boom of the 2000s when developers created a housing bubble by constructi­ng hundreds of thousands of houses on spec, expecting that eager buyers would snatch them up. The bubble burst in 2008, sparking the Great Recession. At the low point of the recession in April 2009, only 480,000 units were

built compared with 2.27 million in January 2006 at the peak of home building.

The rebound in the aftermath was sluggish, as developers faced tightened credit and a depleted workforce.

Credit has eased somewhat for home builders, while tightening for nonresiden­tial real estate developmen­t. Regulatory burdens remain, and lots have grown more scarce, which he said will be a looming challenge, especially in hot markets.

Still, builders of single-family houses are facing headwinds from labor shortages and rising lumber costs. As a result, the NAHB/Wells Fargo Housing Market Index — a confidence meter for home builders — fell to 83 in January from 90 in December.

In 2020, all parts of the homebuildi­ng industry expanded, including housing for entrylevel buyers, said Dietz.

Typically, new constructi­on is purchased mostly by move-up buyers ages 35 to 55, Dietz said. Five years ago, the first-time buyer share of the new home market was less than 20 percent; today it’s closer to 30 percent nationwide.

“Entry-level constructi­on is easiest, in a relative sense, in more affordable markets like the Southeast, Texas and the mountain states,” Dietz said. “Those happen to be the hottest housing markets in terms of home building for exactly that reason: It’s easier to build, keeping housing from become prohibitiv­ely unaffordab­le.”

Neverthele­ss, building entrylevel homes still is challengin­g “because of issues related to fees, taxes and exclusiona­ry zoning requiremen­ts that price out buyers from the market,” Dietz said.

The growing supply of entrylevel new homes falls far short of the number of the homes needed for the population of young families and to put a dent in the undersuppl­y of affordable housing that has developed across the country over the past decade. “The shortfall is close to an estimated 1.4 million homes,” said Mark Zandi, chief economist at Moody’s Analytics..

The pandemic is driving changes in both ends of the market.

Many high-end buyers, seeking more space inside and outside, have fled cities for suburbs and rural areas. Those buyers want two home offices, study areas for kids, state-of-the-art gyms and home theaters, said Derrick Swaak, partner and managing broker at TTR Sotheby’s Internatio­nal Realty in McLean, Va., and president of the Northern Virginia Associatio­n of Realtors. Some of the hotter markets are farther out because builders have larger tracts of land and more efficienci­es.

Entry-level buyers are moving farther out — not necessaril­y by choice. Many first-time buyers are still limited to the “drive until you qualify” inventory farther out from cities.

Although Jones, the nonprofit manager, decided to move outside of Washington, she said there is still a lot to do and explore in suburban Maryland. “I am looking forward to some of the more quiet spaces and having a little bit more room,” said Jones, who wanted a place spacious enough so she wouldn’t outgrow it and have to sell in five years.

“I like the privacy of the ground floor bedroom or potential home office, and the open floor plan of the main floor,” she said.

 ?? CRAIG HUDSON | Washington Post ?? Workers install siding to a new home at Mackenzie Jones’ developmen­t in the D.C. suburbs of Laurel, Md.
CRAIG HUDSON | Washington Post Workers install siding to a new home at Mackenzie Jones’ developmen­t in the D.C. suburbs of Laurel, Md.
 ??  ?? Mackenzie Jones found a roomier home in the suburbs.
Mackenzie Jones found a roomier home in the suburbs.

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