Builders Poised to Benefit From Existing Home Shortage

The housing market is facing a supply and demand imbalance that is leaving homebuyers at a disadvantage but creating a positive business environment for home builders. The U.S. is short 6.5 million single-family homes in relation to household formation between 2012 and 2022, but in June, builders were on track to add 1.47 million units if they continued at the same pace for the rest of the year, MarketWatch reports.

A decade of underbuilding following a slowdown during the Great Recession has widened a supply deficit that has also contributed to a worsening affordability crisis. But as fewer homeowners list their properties in a market characterized by soaring interest rates, demand for new construction is rising quickly.

So the supply of previously-owned houses for sale is at a record lows as people hold on to their homes.

For builders, that helps business: In May, new homes formed 31% of the total number of homes for sale, according to the National Association of Home Builders. Typically, that share is only about 10% to 15%.

Sales of newly built homes in the U.S. fell in June, as demand cooled after a jump the previous month, the Commerce Department reported Wednesday. U.S. new-home sales fell 2.5% to an annual rate of 697,000 in June, from a revised 715,000 in the prior month.

Still, builders are also able to offer incentives to aspiring homeowners to help them buy a home, a tactic that most homeowners may not have at their disposal.

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