Unprecedented Housing Market Conditions
The current housing market is experiencing unique economic forces, including the foreclosure crisis, the Great Recession, the pandemic, and rapid changes in mortgage rates. These factors have created a market unlike any other.
Supply Dynamics
Increase in New Homes
The supply of homes for sale, both newly built and existing, has finally started to increase. However, the increase is primarily in newly built homes. The monthsโ supply of new homes for sale is now almost three times that of existing homes.
Supply of Existing Homes
The supply of existing homes remains low because many homeowners who might want to move up are staying put due to high mortgage rates. This has further tightened the supply of existing homes on the market.
Demand and Pricing
High Demand for Affordable Homes
There is a significant demand for homes in the $100,000 to $500,000 price range, which has the lowest monthsโ supply despite the increase in overall supply. Homes in this price tier are being bought quickly, contributing to rising prices.
Impact of Mortgage Rates
Roller coaster mortgage rates have made it difficult for buyers and sellers alike. Homeowners with low mortgage rates are reluctant to sell and take on higher rates, which limits the supply of existing homes on the market.
Home Buildersโ Position
Entry-Level Home Builders
Home builders like D.R. Horton and K.B. Home, which focus on entry-level homes, are seeing the most demand. These builders are better positioned in the current market due to their focus on more affordable housing.
Control Over Supply
Home builders have significant control over their inventory. The reported supply includes homes that have been permitted, are under construction, or are finiPotential Market Shifts