Homebuilders Aren’t Overbuilding, They’re Catching Up

You might have noticed that there are more brand-new homes available now than usual. Today, about one in three homes on the market is newly built. Here’s what this means for the housing market and your potential move.

Why This Isn’t Like 2008

Many remember the 2008 housing market crash, partly caused by too many homes for sale. Although only a portion of that oversupply came from builders, it left a lasting impression. So, hearing about increased new home construction might make some uneasy.

However, even with the current rise in new homes, there's no need for concern. Builders aren’t overbuilding; they’re just catching up. 

A graph using data from the Census shows the number of new houses built over the past 52 years. After the 2008 crash, there was a long period of underbuilding (shown in red). It’s only recently that we’ve reached the long-term average for annual home construction. 

Even with the recent increase in new builds, there won’t suddenly be an oversupply of homes. There’s still a significant gap to fill after over a decade of underbuilding. And if you’re worried builders are overdoing it, here’s some reassuring news.

New Home Construction May Be at Its Peak for the Year

The latest Census data on housing starts (homes where builders just began construction) and permits (homes where builders can start soon) shows builders are slowing down their pace. Why?

They’re responding to still high mortgage rates and how those affect buyer demand. In essence, they’re adjusting appropriately to the market. As HousingWire explains:

“Even with a massive housing shortage across the nation, homebuilders are completing their pipelines and not seeking as many permits to construct new single-family houses.”

Builders remember the overbuilding mistake from the 2008 crash and are being cautious to avoid repeating it.

You May Have More Options Now Versus Later

If you’re considering a newly built home, here’s how this impacts you. With builders seeking fewer permits and starting fewer new homes, we may be at the peak of new home construction for the year. This doesn’t mean new construction will stop—just that the pace is slowing down, affecting what comes to market later this year. As Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), says:

“Given the recent declines in housing starts, home completions will steadily show declines in about six months.”

So, if you’re ready and able to buy now, you might find more newly built options available now versus later. This could be a good reason to start your search soon.

Be sure to work with a local real estate agent you trust. An agent can provide valuable insights into builder reputations and other key factors specific to your market. If there isn’t much new construction near you, they can guide you to nearby areas where there is.

Bottom Line

While new home construction is a bigger part of the market than usual, it’s not a bad thing. Builders aren’t overbuilding; they’re responding to market signals to avoid the mistakes of 2008.

If you want to buy now while new home options may be at their peak, let’s connect.