Home builders ramped up new-home construction in order to satisfy seemingly insatiable demand from buyers throughout a pandemic-driven housing boom over the last several years, but as the market cools, the number of unsold homes is climbing. After battling back from a decades-old housing shortage, builders are crossing a precarious threshold into an oversupplied market, especially as cancellation rates from priced-out buyers jump to new highs. Even homebuilding giants like D.R. Horton saw cancellation rates surge beyond 20% in the fiscal third quarter ending June 30, Fortune reports.
In order to sell completed homes, many builders are now pumping the brakes on new housing starts and offering incentives to consumers. In response, sellers may be forced to lower their asking prices to turn buyers’ heads, but more price growth is expected over the coming months as a record supply of homes under construction moves into the for-sale market.
Historically speaking, house price cuts always materialize first in the new construction market. Homebuilders, who lose money for every additional day they hold onto an unsold home, are more willing to relent. It's a completely different story for homeowners: They won't give in until market forces make them. If inventory continues to rise, sellers in some markets might finally have to relent a bit.
Advertisement
Related Stories
Housing Markets
10 Biggest Publicly Traded Home Builders Undeterred by High Mortgage Rates
Together, the 10 biggest builders recorded 77,255 new homes in Q1 2024, an increase of more than 18% from Q1 2023
Economics
Mortgage Rate Declines Could Boost Home Sales Following Months of Low Activity
Encouraging economic news bumped mortgage applications up by 2.6% for the week ending May 3
Affordability
NAHB Announces Plan to Address the Housing Affordability Crisis
The National Association of Home Builders has outlined a 10-step plan that would increase the supply of single-family and multifamily for-sale and for-rent housing