Optimism in the new home market, but challenges remain

Overall housing supply has caused some strain on the real estate market for some time now. This has been no different for the new home market as builders have had a difficult time keeping up with the demand. In addition, supply chain challenges and a surge in lumber prices has also caused some new home projects to stall recently. As a matter of fact, lumber prices hit a new record high in mid-February. Needless to say, new home construction is a critical factor for the health of the overall real estate market.

National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI)

The NAHB/Wells Fargo HMI is a monthly survey that gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor. The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

According to the latest NAHB/Wells Fargo Housing Market Index (HMI) released recently, builder confidence in the market for newly built single-family homes inched up one point to 84 in February. According to Chief Economist Robert Dietz, “Demand conditions remain solid due to demographics, low mortgage rates and the suburban shift to lower cost markets, but we expect to see some cooling in growth rates for residential construction in 2021 due to cost factors, supply chain issues and regulatory risks.”


While there are some supply chain and cost challenges for home builders, overall there is a sense of optimism based on the continued strong demand from buyers. As with anything, the overall economic recovery will be a huge factor for the new home market as well. It is expected that the existing-home inventory will continue to remain tight throughout 2021. Therefore, the new home market will continue to be an important sector of the overall real estate market. Although we have seen a rise in material costs, some of these additional costs may be offset by historically low interest rates.

If you are interested in a new construction home in South Florida, we can help. Contact Live South Florida Realty, Inc. for your free customized list of new construction homes today!

By natasha@livesouthfl.com

REALTOR® with Live South Florida Realty, Inc.