Cautious Optimism Permeates U.S. Home Builders

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May 18, 2016

The housing recovery is happening, but at a steady, plodding pace. When some point to builders and say they are still gun-shy from the recession, builders say they are responding to consumers, who may be a bit gun-shy themselves. Whatever the case, demand for new homes continues to rise and construction continues to have trouble keeping up.

As the CEO of Lennar, Stuart Miller, said at a JPMorgan-sponsored conference of the executives from the major public homebuilders, the recovery has been slow and has existed in a pretty tight band across the country, CNBC reports.

The biggest problem right now is the strong demand for entry-level housing mixed with the fact that there are very few home builders focusing on the starter home market. Miller says a major reason Lennar has not focused on starter homes is because, while there may be demand, most entry-level buyers are unable to secure a mortgage necessary to buy them. The other issue is that builders are simply unable to afford to build low-priced homes. As the cost of land continues to rise and land use regulations pile up, it is nearly impossible to end up with a purchase price first-time buyers can afford.

Mortgage rates are one of the major positive aspects in the market right now. Not only did mortgage rates not rise this year like was expected, but they actually dropped to three-year lows. Credit availability also seems to be improving.

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