As COVID-19 reshapes our economy, our newsletter will help you unpack the news from the day.
This morning we got the latest on home construction — housing starts fell 3.6% in January. Permits to build new homes were up, though. Monthly numbers can bounce up and down, but when you look at the longer-term trend, it’s really good. Housing starts are up more than 20% from January 2019, to a level we haven’t seen since before the Great Recession.
We talk a lot about homes being unaffordable, especially for first-time buyers. Now that there’s more new-home supply to meet the demand, could this be part of the solution?
Philip McCoy and his wife are looking for houses in Richmond, Virginia. They have two kids and are moving from Pittsburgh, Pennsylvania, for McCoy to work as an ER doctor. Some houses they wanted to see in Richmond were already sold.
“They were just flying off the market it seemed, so it’s just stressing us out,” McCoy said.
The recent surge in new-home construction could be good for them, especially since a lot of it’s being built in the south.
But, according to Zillow economist Jeff Tucker, the median price for a new home in 2019 was $320,000. And McCoy said new homes are out of their price range.
“There is apparently a lot of new construction, but we’re just not able to quite afford that,” he said.
The median price of an existing home in the U.S. is $245,000. So Tucker said pricier new construction doesn’t hurt.
“That can still help affordability nationwide, because a lot of the people buying those homes are moving up from their own starter home that they’re turning around and putting back on the market,” Tucker said.
And there are plenty of buyers for those homes, according to Joel Kan at the Mortgage Bankers Association.
“Over the last three years, we have seen more sustained household growth,” Kan said. “I think that’s the coming of age of younger potential homeowners.”
That’s millennials moving up in careers, earning more and gradually being able to pay more for a starter home.
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