Homebuilders’ optimism keeps building

In every month in the first half of 2023, homebuilders have become more optimistic about the market for new houses. That’s according to a survey out Monday from the National Association of Home Builders trade group. It found builder confidence rose from a reading of 50 last month to 55 in June.

This comes as new homes play a bigger role in the housing market generally.

Alicia Huey builds custom houses in Birmingham, Alabama. One thing that makes her feel better about the market compared to this time last year is that it’s easier to get the materials to build those homes. 

She’s also learned to order appliances she needs as soon as she starts putting up two-by-fours. “The last house that I’ve just finished, we had to order garage doors as soon as we started framing,” Huey said.

That didn’t used to be the norm, said Huey, who is also chairman of the National Association of Home Builders. There’s clear demand for these new homes, she added — especially because high interest rates have kept owners of existing homes from selling. 

Now, said NAHB Chief Economist Robert Dietz, new construction makes up a much bigger chunk of the housing stock for sale. 

“Typically, it was about 12% — so roughly about 1 out of 10 homes being new,” he said. “Today, it’s 1 out of 3.”

Getting more housing inventory on the market is key to controlling the price of shelter overall; owner-occupied and rental housing have gone up 8% in the past year. Increased construction could help, depending on what is built, noted Danielle Hale, chief economist at Realtor.com.

“Especially if builders try to meet the needs of not just trade-up buyers, but more entry-level buyers,” she said.

But Hale pointed out that costs for both labor and supplies remain high. Historically, it’s been more profitable to build fancier homes for people who can pay more than to build starter homes that are more affordable.