New Construction and the Market Today

By Ethan Plummer

People have voiced their concerns about the growing inventory of newly built homes in the Real Estate Market. There have been comparisons drawn between current inventory and what was seen in 2009 following the mortgage meltdown. Be careful with this comparison, as there is no reason to conflate one statistic of the past as aligning with all the circumstances that caused the previous crash.

Thanks to source data from Census, we get to visualize what is happening with the rate of new construction. First off, you can see that the approach to this recent peak is coming from a deep valley in new construction. 2009, on the other hand, was the cool off from several years of overbuilding that oversaturated the housing market.

KCM provides us with another visual representation of the amount of new construction that is taking place and how it is more similar to decades prior than to what was seen in the mid-2000s, “You can clearly see the overbuilding leading up to the crash (in red), the period of underbuilding that followed (in orange), and how we’re only now getting back to a more normal level of construction:”.

There isn’t any concern from Deputy Chief Economist at First American who said this on the current new construction trends, “This means more homes on the market and more options for home buyers, which is good news for a housing market that has been underbuilt for over a decade.” Anybody reporting on this issue and fear mongering is getting people riled up because that is what’s eye-catching to a reader. Fortunately, there is nothing to be concerned about within these trends. If you’re entering the market, then consider representation so you get to further understand all these intricacies while traversing the market.