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NEW CONSTRUCTION SECTOR OF REAL ESTATE MARKET IS BOOMING IN THE FOURTH QUARTER OF 2020

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Wednesday November 18, 2020
NEW CONSTRUCTION SECTOR OF REAL ESTATE MARKET IS BOOMING IN THE FOURTH QUARTER OF 2020

Nearly every builder in the United States is seeing an increased demand for their services; this is likely because many people are leaving their smaller homes in metropolitan areas in favor of larger homes in the suburbs, but there simply aren’t enough existing homes in those areas to accommodate the spike in demand. As a result, November marks the fourth consecutive month that the home builder confidence index has increased.

The financial boon to builders can be explained by the 6.4% increase in the construction of single-family homes, which coincided with a 3.2% decrease in construction of multi family homes. The South saw a 12.9% increase in the construction of single-family homes, the West and Midwest saw marginal increases, and the Northeast saw a decrease in the construction of
single-family homes.

This is only the beginning, as the supply of homes is incredibly low when compared to demand. As such, there are only two options: (1) housing prices continue to increase until it’s cheaper to build a new single-family unit; or (2) people invest in building a new single-family unit to realize the increased value later. In either case, new construction is the logical choice.

In October 2020, new construction increased by 4.9% over September 2020, as construction began, at a seasonally adjusted rate, on 1.53 million homes; though permitting on these homes remained constant, at 1.49 million, in both September and October of 2020. As we noted above, the trend is likely to continue.

At the Chernov Team we understand that knowledge is power, and knowledge of a sector of the housing industry that is booming is powerful knowledge indeed. At the Chernov Team we know that whoever comes to the table most prepared leaves with the most, and the Chernov Team always leaves the table with the most.

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