The sentiment and index of new housing is as strong as it has ever been within the community of exiting home builders.
Not only are prices up, but the near future looks attractive for several reasons:
(1) Actual number of new home builders has shrunk to a low right now.
(2) The cost of any new builders entering the market is more difficult with respect to (a) obtaining a bank loan to start building and (b) buying available property that already got scooped up by other builders.
(3) Even though the pace of building new homes has slowed, that has resulted in lower “new” inventory. Coupled with a strong current demand by potential Buyers, this has pushed prices higher.
Now there are difficulties that builders are facing – mainly higher costs to acquire materials and a labor shortage.
Home sales have hit their highest pace in a decade – national median home price jumped almost 7% from last year – millennials are getting back into the market –
Bottom line: Existing home builders are riding the wave of higher prices, more profits, and fewer competitors…in other words, near nirvana.
Source: Wall Street Journal, May 16, 2017, Page B12 and Page A2.