New homes are seeing a boost in popularity, but builders’ confidence remains low.
While existing home inventory continues to remain below ideal standards, growth in inventory of new homes has led to more buyer interest. According to the National Association of Home Builders, inventory of new homes on the market is up 25% compared to the same time last year. Buyer traffic on new homes represented 21% of total traffic in the second quarter and 27% in the third quarter of 2022. The Northeast saw the biggest jump in interest, rising from 18% to 27% from the second to third quarters this year.
Despite this renewed interest in new homes, builder confidence continues to struggle, dropping for the 10th consecutive month. NAHB reported that builder confidence in the newly built single-family home market fell to 38 points, dropping 50% in six months, the lowest confidence reading in more than a decade (excluding the early days of the pandemic in 2020). Despite rising numbers, builders cited traffic of prospective buyers as the top concern, followed by sales expectations over the next six months and then current sales conditions. Rising mortgage rates, high cost of labor and supply shortages are continuing to worry builders.
Single-family starts also dropped in September, falling 8.1% from August and down 5.6% year over year. Additionally, the number of single-family permits filed has dropped for seven consecutive months. Multifamily starts also dropped, falling 13.2%. Despite these concerns, there are currently 800,000 single-family homes being built, which is an 11% boost from last year. Including both single-family and multifamily, housing under construction is up 19% year over year.