Why New Homes are in Such Demand
Mortgage rates are low, buyer confidence is up, and the world is slowly creeping out of its cocoon into a new way of life. The type of life we’ve been dreaming of since things first shut down is slowly coming to fruition.
Over the last several months, we’ve had a lot of time to dream. To envision what the perfect home might look like or imagine what life might be like in a new space. Perhaps you’ve become acclimated to your new work-from-home life and have no intention of going back. Or maybe, having nowhere to go has been the perfect opportunity to save up for the home of your dreams. Either way, now may be a good time to consider a new home as the demand for new homes peaks.
Whatever your situation, the current demand for new homes may make the home buying process seem overwhelming but you can find the home you’re looking for with a little research and planning. So, let's explore a few of the reasons new homes are in such demand before talking about some of the ways new home builders, like Pulte Homes, have been working to provide people the opportunity to find the home of their dreams.
5 Reasons New Home Demand is High
1. Mortgage Rates are Low
In the early 1970s, mortgage rates ran as high as almost 8 percent. Then rates peaked at over 18 percent in the early 80s, prompting the Federal Reserve to step in to combat inflation. They did this by increasing the federal funds rate, effectively causing mortgage rates to drop to an all-time low of about 3.31 percent in 2012. On a $200,000 loan, the difference between the 18 percent peak and the 3.31 percent low is over $2,000 a month.
In 2020, mortgage rates started to see new historic lows as rates dipped below 3 percent. As the economy has started to recover from the impact of the pandemic, these rates have inched upwards, but still remain around 3 percent. This long and steady state of low rates has helped drive an increased number of buyers who are eager to lock in a low rate before it’s too late. And with higher demand, there have been constraints on the number of homes available, helping to bolster demand for new homes.
2. Buyer Confidence and Desire is High
Coupled with low rates, we have also seen COVID restrictions easing, unemployment rates improving and buyer’s confidence, sometimes buoyed by stimulus support, experiencing a boost over the last several months, all of which has led to a swell of new home demand.
For those lucky enough to maintain employment during the pandemic, the latter half of 2020 provided an amazing savings opportunity, meaning increased funds to place on a down payment. Combined with low interest rates, buyers are feeling increasingly better about the idea of purchasing a home.
And, on top of that, the last year has provided plenty of motivation for making a move. Whether it was driven by a change in work situations, like moving permanently into a remote role, or a desire for more land, space or sunshine, several buyers entered into the market, many for the first time.
3. Limited Supply of Existing Homes
This influx of new buyers, many who do not currently own a home has led to an interesting dynamic-- an extremely limited supply of homes on the market. As of early 2021, housing inventory is down by 28.2% year-over-year, according to the National Association of Realtors, with properties typically selling in 18 days—a record low.
This limited supply of homes, particularly resale homes, has led to an increased demand on new construction throughout the country.
4. New Home Affordability
Interestingly, the limited supply of existing homes has created another boon for new homes-- increased relative affordability. As existing homes have become scarcer, the price for new homes has become more affordable in comparison. According to the U.S Census, the national median price of a newly built home sold in March of 2021 was $330,800, whereas, the national median price of an existing home sold during the same time was $329,100, according to the National Association of Realtors. That’s a small difference to pay for a new construction home that offers buyers opportunities to personalize.
5. Smarter New Home Layouts
In addition to becoming more affordable, relatively speaking, new homes are also in demand because home builders have been focusing on developing new homes that fit the needs of the new “normal”. Whether that has been by offering more plans that provide work-from-home options, more robust smart home technology, or homes with features that prioritize health and wellness, new home layouts are better prepared for the demands of today.
3 Things Impacting New Home Supply
Clearly, there are a lot of reasons why people are looking to buy new homes now, but it is important to note that there are few things that are also impacting new home supply, outside of just high demand:
A Shortage of Available Land-- As new home sales have increased dramatically; home builders are faced with a shortage of open lots for sale. While many builders have been actively trying to buy new land, the process of developing, titling, and more means that for the time being, there is a shortage of land available for home builders to offer to the public.
Limited Supplies-- Most of us are aware of some of the complications in the supply chain that have arisen due to COVID-19-- just think back to earlier shortages on things like toilet paper and eggs. Well, in much the same way, builders have been working to overcome shortages and delays on building materials, like lumber, in addition to home finishes, like new appliances. These limitations have been making it hard to address the demand for new homes and have been causing longer build times for new home builders.
Labor Shortages-- Difficulty in finding skilled construction labor is not necessarily new. It's been plaguing the industry for a while. But, with added demand both for new construction as well as the uptick in repair and remodeling, new home builders have to compete in order to secure the best skilled labor like plumbers, electricians and more.
Between some of the limitations impacting new home supply and the increased demand, new home builders have needed to be creative in supplying new homes to customers.
Buying a New Home Now
So, exactly how have new home builders shifted their home buying process to accommodate the new landscape?
Well, while many have tried to keep open and transparent communications with customers throughout the home buying and building process, some home builders have turned towards a system known as the Easy Offer Process or (EOP).
What is the Easy Offer Process?
The Easy Offer Process is an online solution that allows interested buyers to submit an offer on available homesites in their community of choice.
How does the Easy Offer Process Work?
At the highest level, the Easy Offer Process starts after a homesite is released and an offer period opens. During the offer period, which typically lasts one day, interested parties can submit their best offers for their desired homesite. At the end of the offer period, the builder will assess the different offers on each home and select the best offer.
How does the Easy Offer Process Help Me?
The Easy Offer Process is beneficial because it helps to ensure that the person who most wants the house, and is ready to buy, is able to secure the homesite. Unlike wait lists and first come, first serve situations, EOP is not dictated by who happens to walk through the door first, and it is not held up by folks who may not be ready to buy. And, unlike the lottery system, EOP allows you some control over the home buying process.
Want to learn more about the Easy Offer Process? Here is a handy overview guide to EOP that you can download.
Buying a home can be a stressful process. But it’s especially difficult when demand is high. Working with new home builders can help to ease some of the stress, because even when demand is high, and homes feel like they are selling quickly, you can rest assured, your dream home is out there—it just may not have been built yet.
Contributed to Your Home blog
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