The mid-pandemic housing boom is coming to an end, and rather than raising their budgets, entering into home lotteries, or adding their names to waitlists, buyers are canceling orders, pulling out of purchases, and waiting for affordability to improve. In response, builders are offering a range of incentives to hold on to waning demand, but few buyers are budging and home sales remain low in the midst of a major market correction which Realtor.com says will likely cause a subsequent slowdown in new-home construction over the next 12 months.
June home sales fell 31%, and that number dropped even further in July, according to preliminary data from John Burns Real Estate Consulting. As a result, builders are applying for fewer construction permits, and 87% are planning to slow down their pace of construction in the year ahead.
New home construction could dip the most in some of the housing markets that got the most overheated during the COVID-19 pandemic. These are the kinds of places that are already correcting, with home sellers in many of them being forced to cut prices to woo buyers.
Building is expected to slow the most in the Pacific Northwest, Northern California, the Southwest, and Texas, says Bachman of John Burns. Metropolitan areas like Boise, ID; Austin, TX; Phoenix; and Salt Lake City are slowing the most, she says. Priced-out buyers and those worried about buying at the peak of the market are dropping like flies.