Is Building Coming To A Halt?

  • June 19, 2024
  • 2 min read

So, is housing starting to have cracks in the armor? Up until now, home purchasing has been one of the bright spots of the economy. There’s much more demand than supply. Houses around the market a short period of time. Prices are high. New houses are being constructed at a fast pace.

Emerging Slowdown
But now we’re starting to see some slowdown. We’re starting to see a lot more price reductions on resale homes. We’re seeing more in almost as much inventory as there was pre-pandemic. Here’s the big news: we’re starting to see home builders start to pull back on new home construction.

Home Builders’ Shift
Up until now, home building was one of the bright spots of the economy. New homes were the only game in town. There weren’t many resale homes. There weren’t many houses on the market to buy at all, so the new home construction was filling that shortfall, filling that gap. Now we’re starting to see some builders looking at the future. Interest rates are going to stay high. The Fed already said we’re not cutting rates. They’re starting to see resale homes start to have more inventory that crowds out new home purchases.

Builders’ Precautionary Measures
We’re starting to see price reductions on resale homes, so the builders are saying, “No, we’ve seen this movie before. We went through 2008-2009. We’re not going to have the same crisis in our industry, so let’s pull back.” So what are they doing? They’re starting to pull less permits. They’re starting to reduce the number of housing starts. They’re having builders have a pause, and that could have a significant effect because it takes a year or two for this to bubble up through the market.

Potential Future Impact
So if in 2026 or 2027 there are less new homes available for purchase, that could again affect the housing market because people need to live someplace. There are still people out there that want to buy a home, and having fewer of them available a year or two or three down the road could make the housing crisis get even worse.

Invitation for Thoughts
What are your thoughts on this? Put them in the comments.

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