There is good news for home buyers in September. Mortgage rates are dropping quickly and that is creating strong optimism in U.S. construction companies building new homes. The market is opening up again and builder confidence is once again gaining strength. The demand for new construction is high, and home buyers are always on the lookout for that fresh, new home option when they want to purchase a house. In the last few years, demand has well exceeded the availability, but with builder’s feeling more secure their confidence levels are higher than they have been since 2005.
New mortgage options giving home buyers the ability to buy new homes with less than a 20% deposit are making it possible for builders to feel good about sales. Interest rates have plummeted as well, and some lenders are offering new home mortgage rates as low as 3%. This is a great time to think about buying a new home.
CONFIDENCE LEVELS JUMP IN SEPTEMBER AS HOMEBUILDERS RECONSIDER NEW CONSTRUCTION PROJECTS
The NAHB, also known as the National Association of Homebuilders, keeps close tabs on the current conditions of the housing market. They use frequent member surveys to judge the conditions of the housing market and provide an overview of the future of home sales. The report, known as the Housing Market Index, otherwise known as the HMI and often affectionately known by those in the industry as the “Homebuilder Confidence Survey” lets builders know what the atmosphere is in the lending industry and real estate sales.
The HMI focuses largely on single-family homes and new construction over commercial properties and other real estate sales. It is a great way to judge the overall economic conditions of the U.S. as well as the construction market. That is because housing is usually the first area impacted by any economical change in the United States, and builders often feel the changes in the mood of the country long before Wall Street feels the pressure.
Over the last ten years, new construction hit its peak in mid-2005. That was over a year prior to the big housing crash showed its total impact on the stock market and banking industry. Builders have a more reflective experience to buyer drop-offs and a lack of new sales. A fading real estate market for new homes will hit their bottom line harder and faster than it creates turmoil in the lending industry or other areas of the economy. Seeing a slowdown in new construction is a sign of imminent struggles for the economic future of the housing market and the economy as a whole.
It isn’t just about the actual sales either. Builders see what is happening with home buyers first hand. They notice a drop in foot traffic and see a slow sales trend begin at the very early stages of consumer activity levels. When consumer confidence fades, it is a sign of what is to come, and builders that cannot shoulder a high risk commodity on their books, back down in sales.
Seeing a rise in new construction is, in turn, a sign of good things to come in the housing market and the economy. It is a signal of pending economic recovery.
In September 2014, construction on new homes rose to 59, the highest it has been since the end of 2005. That enthusiasm is shown in the HMI as well. Readings in the Housing Market Index have held strong at over 50 for several months in a row. 50 is the tipping point between good and bad conditions in the real estate construction market.
The year started off weak with builders worrying a bit about the market conditions, but the low interest rates have given them reason to have hope and a good outlook for the future. While that is great news for those looking to the housing market for economic indications of a recovery, it can be a little daunting for new home buyers. Strong builder confidence means the construction companies do not have to make as many concessions to get home buyers through the doors. Anyone thinking about buying a new home is best off looking for that dream home today.
HOUSING MARKET EXPECTED TO RISE IN 2015
Home sales are expected to continue climbing in 2015. The NAHB’s reports show more demand and increased inventory throughout the remainder of 2014 and well into 2015. Judging by current inventory, recent sales activities and foot traffic, the report shows a prevalent trend. The current sales match the very best sales in the previous year and foot traffic is the highest it has been since late 2005. Buyers are on the move and that means opportunities for homebuilders.
High demand offers builders a unique challenge. They need to consider building new homes or raising the price on existing inventory. With such strong demand, many builders are choosing both options. That makes now the best time to get a good price on new construction. For the moment, buyers still retain some control over the level of home prices in the market.
It is still possible to negotiate a strong deal with some additional perks when a buyer goes into talk with a homebuilder. This is especially true when the buyer has already been approved for financing. That gives them the leverage they need to get the most out of a deal for a new home purchase. It isn’t a good idea to put off making a purchase, however. The trend toward builder control has already shifted. The HMI shows that builders are beginning to exert more and more control over the situation. That is expected to continue through the end of the current year and into 2015.