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Low existing home inventory fuels buyers interest in new homes

Aug 13, 2023

More Americans are turning to new home construction as existing inventory remains low and mortgage rates begin to stabilize, the National Association of Home Builders (NAHB) reported on June 1.

Sales of newly built, single-family homes increased in April, reaching the highest level since March 2022.

On June 7, builders from across the country will meet with lawmakers in Washington, D.C., to discuss solutions for ramping up distribution transformer production and investing in skilled trades training programs nationwide.

Transformer delays and limited growth of the skilled labor workforce aggravate the nation's housing affordability crisis. In an NAHB analysis of home buyer perception in the first quarter of 2023, the inability to find an affordable home remains the most common reason buyers looking for three months or more are unable to make a purchase.

"Buyers are purchasing new homes so they can start investing in homeownership now instead of waiting for an existing home to come on the market," NAHB Chairman Alicia Huey, a custom home builder and developer from Birmingham, Alabama, said in a news release. "Builders want to meet buyer demand; however, high construction costs and labor shortages remain persistent challenges for the residential construction industry."

Limited existing inventory has placed a renewed emphasis on new construction as many homeowners with loans below current mortgage rates are electing to stay put. Current interest rates have more than doubled from 2021. As a result, the supply of existing homes is low.

With limited available housing inventory, new construction will continue to be a significant part of prospective buyers’ searches in the quarters ahead, according to the news release.

The current housing environment is fueling cautious optimism among builders. They continue, however, to face challenges in meeting the demand for new construction.

Residential construction obstacles include shortages of distribution transformers, other building materials and tightening credit conditions for residential real estate development and construction brought on by the actions of the Federal Reserve to raise interest rates.