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Frazzled home buyers can breathe a (little) sigh of relief—particularly if they live in the Northeast.
In a sign of more new homes to come, builders secured 4.6% more permits to construct brand-new homes from December to January, according to the seasonally adjusted numbers in the latest residential sales report jointly released by the U.S. Census Bureau and U.S. Department of Housing and Urban Development. Permits were 8.2% higher than in January 2016.
“The number of new permits is encouraging,” says Joe Kirchner, senior economist at realtor.com®. “Eventually that will lead to new homes on the market.”
In a time of bidding wars, offers over asking price, and low inventory of homes for sale, that’s music to the ears of many would-be buyers.
The Northeast saw the biggest spike in permits in January—rising a stunning 29.6% from December and 71.3% from a year ago. However, the region still saw the fewest number of permits obtained compared with the rest of the nation—likely due to the lack of available land, high property prices, and more government regulations than in other parts of the country.
“Builders are responding to the market,” Kirchner says of the flurry of new permits in the Northeast. Since there’s room for prices to go up in the region, he says, builders are going to chase those higher prices.
Custom home builder Forbes Capretto has seen business increase about 20% in the past year alone, says William Tuyn, vice president of development and diversification. That’s led to the company hiring more workers and streamlining its systems so it can put up more residences this year.
“The existing housing is older in the Northeast than it is in other parts of the country,” says Tuyn, whose company constructed about 60 homes last year. But “a new modern home has a lot of efficiencies—so there’s more payback.”
He also thinks local buyers are simply more confident in the economy and are therefore ready to plunk down their savings on a new home.
New homes don’t come cheap, though. The median cost was $301,400 in December, according to the most recent U.S. Department of Commerce data. That was 29% more than the $233,500 median price for an existing home, according to the most recent National Association of Realtors® report.
The future may look bright for buyers. But for those hoping to score a residence this winter with that new-home smell and those top-of-the-line, energy-efficient appliances, the news wasn’t so great.
The number of homes that were finished in January fell 5.6% from December and was down 0.9% from the same month a year earlier, according to the report.
“There’s a pause in the number of new homes completed,” says Kirchner. “But that may not last too long.”
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