Current Housing Report: Demand Still Outpacing Supply
May U.S. home sales and construction continued their trend higher as the housing market sustains its record-breaking growth. South Florida is no exception as home sales rose nearly 8% year-over-year in the tri-county region. While indicators point to a red-hot housing market, potential homebuyers struggle with the dwindling supply of homes and affordability.
See a “For Sale” sign? Better Act Fast
The U.S. Census Bureau released its report on new residential construction showing that housing starts are up a whopping 20.3% from May 2017! Despite housing starts at the highest level since 2007, the supply of homes for sale dropped 5.4% in May compared to May, 2017.
Just how quickly are homes selling? Homes sold in May went under contract in just 34 days on average. This actually broke the previous record of 36 days set by the month prior. With the shortage of listings, many buyers face higher prices and even bidding wars. This is evidenced by homes in May selling for an average of 27.6% above their listing price.
Construction Costs: A Growing Concern for the Lower-end Market
Although construction posted strong growth, rising costs such as soaring material prices and labor shortages contributed to an actual decline in the National Association of Home Builders’ monthly confidence index. Notably, rising costs have made it difficult for builders and developers to build the entry-level and affordable homes in demand. Record breaking lumber prices alone have added approximately $9,000.00 to the price of a new single family home since January, 2017.
There is, however, a striking divergence between the luxury and mainstream markets that is evidenced by falling luxury home prices in major markets while the broad market continues to post strong gains. Miami in particular saw its average luxury price fall over 6% from 2016-2017 while the while the market as whole saw a price gain of more than 9%. The housing report for the first quarter of 2018 showed the trend continuing as wealthy neighborhoods such as Key Biscayne posted an average decline of 1.8% in existing home values while more working-class neighborhoods such as Hialeah posted an average increase of 7.2%.
Still, builders remain overall positive as they cite strong economic growth, improving job creation and high housing demand as drivers for higher housing construction in the months ahead. We certainly hope so! Unless the Trade War becomes more than just words.
From the trenches,