Who doesn’t love a new home?  The smell of freshly cut lumber and new paint can arouse the senses of any homebuyer, not to mention the rush that comes from picking out brand new appliances and making design choices to customize your home.  We spend months planning and waiting in anticipation as we watch our vision transform from a plot of dirt in the ground into the beautiful home that we helped create.  When we are finally able to move into our new home it feels like a dream come true, but that dream has seemed out of reach for many of us in recent years due to high demand.  Amongst rising prices, bidding wars, and the inability to make custom choices many of us have been taken out of the new construction game.  Well I predict that is about to change, and here’s why.

How the Recession Affected Inventory

In order to understand why there has been such a high demand for new construction we have to go back about 13 – 14 years.  Remember those years?  Yeah, me too, and it’s a time I would rather forget!!!  But The Great Recession happened and it affected all of us, including builders who quickly realized that they were not making the profit margins that they were used to.  As new construction became less profitable builders built fewer and fewer homes until they essentially stopped building altogether.  This lasted for several years, and during that time the large volume of inventory that would have normally been created by builders simply didn’t happen. 

Increased Demand

Fast forward a few years to an improved economy and we saw people starting to buy houses again, but what did they find?  You guessed it:  They had much less to choose from!  The halt in construction in the years following the recession resulted in a profound lack of inventory.  Moreover, the newer homes that would normally be available in the real estate market didn’t even exist.  With the lack of new inventory the re-sale market went into overdrive reducing the inventory even more, and before we knew it we were seeing people line up for a chance to purchase the few homes that were available creating one of the strongest seller’s markets we have seen.  Homebuilders responded by re-starting their stagnant communities and starting new ones.  In order to jump start their companies and re-gain consumer confidence they offered significant discounts on new construction and offered a variety of incentives to lure buyers into their new communities, and it worked!  Buyers were thrilled that they could finally build the brand new home of their dreams.

The COVID Years

Fast-forward a little more and we enter the “COVID Years.”  I will not go into the catastrophic effects COVID has had on so many of our lives, myself included, but as people realized that they could work from home and “working virtually” became more common they started moving to Florida in record numbers (and they still are).  With this influx of new buyers, homebuilders realized that they no longer needed to offer the discounts and incentives that they did before; in fact they could actually raise their prices across the board and take away the ability to customize homes and people would still line up to buy their product.  They also started instituting procedures like waiting lists, lotteries, and “bidding procedures” to handle the volume of buyers who were competing for their product.  While some buyers endured this process for the chance to build their new home, others abandoned the idea altogether, resigned to the fact that a new construction home was now out of their reach. 

What Is Happening Now?

So that brings us to today.  Why do I think that things are about to change regarding new construction?  It’s not based any studies that have been done or any data that has been collected, but as I am out there doing my real estate thing I can see the signs in my day-to-day business.  For the past couple of years I have not seen new construction homes show up on the local MLS system because they were selling their homes so quickly there was no need to put them on MLS.  However, in recent months I have seen more and more builders put their properties on MLS which tells me that they no longer have buyers lined up to buy them anymore and they are looking for more exposure.  I am also starting to see things like “no bidding,” “available now,” and “$5000 closing incentive” attached to their marketing, more signs that their inventory is starting to overshadow potential buyers.  I’m not saying that the new construction market is crashing, far from it!  But we are starting to see the signs of an equilibrium that will bring us back to a more balanced market.

Tony’s Take on the Situation

Based on my experience in the marketplace and in my own personal opinion what’s happening now (and what is about to happen) is a simple case of supply and demand.  For the past few years we have had an inordinate number of buyers clamoring for limited new construction homes.  Homebuilders responded by ramping up their production and applying for building permits in record numbers.  Now, as inventory is increasing and buyers have more choices, builders have to compete with re-sales again.  Additionally, builders have thousands of homes currently being built with an equal number of building permits filed with the county.  If builders want to sell these homes they are going to have to go back to the traditional ways of selling their product; offer discounts, offer incentives, offer the ability to customize. 

So if you’ve been wanting to get back into the “new construction game” then this is your time!  There are thousands of homes that have already been started and many more that have already been permitted.  If builders want to sell these homes they will have no choice but to start improving prices and offering more and more incentives.  It’s already happening, and it’s great news for buyers!