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More New Homes in the Pipeline for Buyers

Desperate house hunters, whose patience and bank accounts have been stretched pretty thin by the sheer lack of homes on the market, may soon find a little relief—even if it’s not quite as much relief as economists had hoped for.

The number of new residences under construction in March shot up nearly 17.5% over the previous year, to 972,100,according to the non-seasonally adjusted numbers in the U.S. Department of Commerce’s monthly new residential construction report. It was a more modest increase, almost 1.5%, over the number of new homes rising from the earth in February.

That’s looking at the actual numbers, rather than those that are adjusted to compensate for seasonal fluctuations. The seasonally adjusted numbers, which have been smoothed out over a 12-month basis, showed monthly drops in the number of new permits issued and construction starts.

“We’re seeing growth,” says realtor.com®’s chief economist Jonathan Smoke. “That will help with the tight inventory.”

But it’s not as high as he and many others had hoped. “We’re just not seeing that level of growth that would really help,” he says.

March is typically a super-busy month for builders, as the weather warms up and the hard hats come out, Smoke says. But this year, more builders most likely got started in February instead, due to the milder (aka not sub-zero) temperatures. This explains the small month-to-month gain, he says.

Nearly half of the new homes going up, a whopping 424,600, are under way in the South—a region largely unaffected by the freezing temperatures up north, according to the non-seasonally adjusted numbers in the report. It was followed by the West, at 240,100.

Real estate broker Patricia Wilds, of Century 21 Blackwell & Co. Realty, in Spartanburg, SC, is seeing a tidal wave of new construction as new subdivisions pop up at a breakneck pace. Each subdivision has about 200 single-family homes.

“We have a lot of new corporations coming into the upstate of South Carolina,” she says. “It means they’ll be bringing more people in. There will be a lot of people moving into the area to get the new jobs.”

Demand is already outstripping the supply of homes on the market in her area, pushing prices up about 5% over the previous year, she says.

“The companies are building as fast as they can get them up,” says Wilds, who has been selling homes for about 25 years. “This is the fastest I’ve ever seen new construction grow.”

Beyond the South, there were about 182,900 homes under construction in the Northeast and 124,600 homes in the Midwest, according to the report.

Nationally, about 77,800 new abodes were completed last month, according to the report. That’s up 8.8% from February and 28.6% from a year earlier.

But too few of those were rental units, a particularly troubling fact considering that the nation is suffering from a lack of affordable homes for both buyers and renters, says realtor.com’s Smoke.

“We’re starting to see that multifamily housing [which includes condos and rentals] is slowing down much more quickly than expected,” Smoke says.

He believes developers don’t want to flood the market with more rental properties, thereby bringing prices down. He was also disappointed in the number of new permits issued in March to erect private homes, which he had hoped would have been higher.

Permits jumped nearly 16.6% to 98,500 from February to March, according to the non-seasonally adjusted numbers. That was an almost 7.9% year-over-year rise.

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