2017 could be the year for new homes in the US. March saw the strongest sales of property since early 2007 and prices notched up their 61st consecutive month of rises. Builders have increased construction of new homes since January, but much more building is needed as inventory levels remain at rock-bottom levels.
Fastest sales on record
US properties now spend less time on the market than ever. The National Association of Realtors (NAR) reported that in March, 48% of homes took less than a month to sell. The figure for all homes comes in at 34 days. This represents a drop from 47 days a year ago and is the lowest on the NAR statistical registry.
Ellie Mae, mortgage analysts, reported a similar pattern. Their Origination Insight Report for March this year found that properties spent an average of 43 days on the market. Mortgage approval and closing also took an average of 43 days.
Prices for all property carried on their upward trend. The median price including new homes in the US reached US$236,400 in March, up 6.8% in the year and the 61st month in a row of price hikes.
This busy market combined with rising prices continued to exert pressure on the supply of homes in the US. While there was slightly more inventory on the market in March – it rose by 5.8% on February – it remains considerably lower than March 2016. The 6.6% fewer properties represent just 3.8 months’ supply, down from 4.4 months in October 2016.
“A growing pool of all types of buyers is competing for the lacklustre amount of existing homes on the market,” commented NAR Chief Economist Lawrence Yun on the statistic. Low supply levels have been one of the defining characteristics of the market for months.
New homes in the US only answer
Market analysts are unanimous in that the only answer to the growing shortage of property is an increase in new construction. “Until we see significant and sustained multi-month increases in housing starts, prices will continue to far outpace incomes and put pressure on those trying to buy,” said Yun in the NAR press release.
There’s a chronic shortage of new builds in the US. In a previous NAR report, Yun estimated that the country needs to build around 1.5 million new homes every year. This combined with the dearth of new-build starts between 2007 and 2016 makes a total deficit of 8.3 million properties.
Strong start for new homes in the US
2016 saw a marked increase in new-home construction and this tendency has carried forward into 2017. In Q1, ground breaking went up by 8.1% compared to the same period in 2016. This increased activity has had a very positive effect on the supply of new properties in the US, which stood at a total of 266,000. This figure represents the highest figure for seven years.
Sales too have started an upward trend. The pace in March was the highest for eight months – buyers purchased 5.8% more new homes in the US bringing the annual total to 621,000 units. The figure for Q1 is 12% higher than the same period last year according to the US Commerce Department.
“New homes in the US can look forward to a good year,” says Dies Poppeliers, Managing Director at BRIC Group. “A shortage of property on the general market and strong interest from buyers across the board can only increase demand for properties. New homes are obviously the only thing that can meet this need.”
BRIC Group, an investment company specialising in global real estate opportunities, offers US real estate investments including turnkey properties in Florida and Houston, and land plots in Florida. BRIC Group is also developing The Coral resort, in Northeast Brazil, a luxury beachfront resort with land and villa investment opportunities. BRIC Group has been creating wealth for its clients since 1996 and has offices in Brazil, Dubai (consulting office), Hungary, Spain and the US.
(Sources: NAR, Ellie Mae)