It’s not much fun being a home buyer these days, with the lack of available homes driving prices—and stress levels—to new highs. But it’s about to get a bit better for those seeking to move into a newly constructed home of their very own.
Permits, the best indicator of how many newly built homes will rise over the next few months, were up in August, according to the seasonally adjusted numbers in the latest residential sales report jointly released by the U.S. Census Bureau and U.S. Department of Housing and Urban Development. Builders were issued 5.7% more permits from July to August and 8.3% more than August 2016.
(The numbers we looked at have been smoothed out over a year to account for seasonal fluctuations in the market.)
However, the bulk of those increased permits were to put up condo and apartment buildings with five or more units. After a dip in July, permits for those buildings rebounded, shooting up 22.8% month over month and 10.2% year over year.
Meanwhile, the number of permits for those perennially in-demand single-family homes—the typical standalone abodes that usually come with yards— dipped 1.5% from July. But they were up 7.7% over August 2016.
“It’s not spectacular construction growth, but it’s slow and steady in the right direction,” says Chief Economist Danielle Hale of realtor.com®. “Eventually, the pickup in single-family home construction will mean [buyers] will have more options. Especially with the limited number of sales right now, more options are really needed.”
Housing starts, where new construction has begun but isn’t completed yet, fell 0.8% from July to August. But it rose 1.4% from the same month a year earlier. That’s likely to fall further, however, as more construction workers begin to rebuild the devastating damage caused by Hurricanes Harvey and Irma.
“The shortage of labor in construction will further intensify as more workers concentrate on rebuilding rather than on new construction,” Lawrence Yun, chief economist of the National Association of Realtors®, said in a statement.
The other big bout of bad news was that the number of completed residences fell 10.2% month over month in August. It was up a little, by 3.4%, year over year. Single-family homes, again, fell the most, by 13.3%, from July to August and were down 2.7% annually.
It’s important to note that new homes aren’t for everyone. They cost significantly more, about 21.4% more to be exact, than existing homes, which have been previously lived in. The median price of an existing home was $258,300 compared with $313,700 for a newly built home in July, according to the most recent data from NAR and the U.S. Census Bureau and U.S. Department of Housing and Urban Development.
“As new construction continues to increase, home shoppers will eventually have more [choices] and a bit more time to make purchase decisions compared to today’s quick-moving housing market,” Hale says.