jar546
Forum Coordinator
The housing market is on the brink of what experts are calling a 'golden age' for new home construction. This resurgence is primarily driven by a surge in homebuilding activity and a significant uptick in new home sales. According to the latest data from the US Census, new-home sales soared by 18% year-over-year in October, reaching a seasonally-adjusted pace of 679,000 units. Furthermore, privately-owned home building permits experienced a 4% year-over-year increase in November, reaching a rate of 1.4 million permits.
The increased demand for new homes can be attributed to several factors. Firstly, prospective buyers now have the opportunity to customize their living spaces, a luxury not often available when purchasing existing homes. Additionally, homebuilders are luring buyers with enticing incentives such as mortgage rate buydowns. This strategy involves homebuilders providing substantial upfront payments, acting as "discount points" to lower the mortgage rates on newly constructed homes. On average, homebuilders are reducing mortgage rates by 150 to 200 basis points. Considering the current average 30-year fixed mortgage rate hovers around 7%, this translates to rates as low as 5% for certain new homes—a significant advantage for buyers seeking to avoid steep borrowing costs.
In contrast, the existing home market faces a challenging environment due to elevated mortgage rates. Existing home sales have largely stagnated over the past year, as higher borrowing costs have discouraged homeowners from listing their properties for sale. Many are reluctant to let go of the historically low mortgage rates they secured years ago. It's expected that this trend will persist as mortgage rates are anticipated to decrease slightly in the coming year. However, these rate reductions may not be substantial enough to unlock the existing home inventory, leading to a continued standstill in the market. Some housing experts suggest that rates would need to drop to around 5% to stimulate a surge in existing home listings. Nevertheless, most real estate economists predict only a modest decline in mortgage rates, with forecasts like Redfin's predicting a 30-year fixed mortgage rate of 6.6% by the end of 2024.
The increased demand for new homes can be attributed to several factors. Firstly, prospective buyers now have the opportunity to customize their living spaces, a luxury not often available when purchasing existing homes. Additionally, homebuilders are luring buyers with enticing incentives such as mortgage rate buydowns. This strategy involves homebuilders providing substantial upfront payments, acting as "discount points" to lower the mortgage rates on newly constructed homes. On average, homebuilders are reducing mortgage rates by 150 to 200 basis points. Considering the current average 30-year fixed mortgage rate hovers around 7%, this translates to rates as low as 5% for certain new homes—a significant advantage for buyers seeking to avoid steep borrowing costs.
In contrast, the existing home market faces a challenging environment due to elevated mortgage rates. Existing home sales have largely stagnated over the past year, as higher borrowing costs have discouraged homeowners from listing their properties for sale. Many are reluctant to let go of the historically low mortgage rates they secured years ago. It's expected that this trend will persist as mortgage rates are anticipated to decrease slightly in the coming year. However, these rate reductions may not be substantial enough to unlock the existing home inventory, leading to a continued standstill in the market. Some housing experts suggest that rates would need to drop to around 5% to stimulate a surge in existing home listings. Nevertheless, most real estate economists predict only a modest decline in mortgage rates, with forecasts like Redfin's predicting a 30-year fixed mortgage rate of 6.6% by the end of 2024.