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New Home Sales Rise in March

Robert Dietz2025-04-23T10:33:44-05:00

A modest decline in mortgage rates and lean existing inventory helped boost new home sales in March even as builders and consumers contend with uncertain market conditions. Sales of newly built, single-family homes in March increased 7.4% to a 724,000 seasonally adjusted annual rate from a revised January number, according to newly released data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The pace of new home sales in March was up 6.0% compared to a year earlier. The March new home sales data shows that demand continues to be present in the market, provided affordability conditions permit a purchase. An increase in economic certainty would be a big boost to future sales conditions. Lower mortgage interest rates helped boost the pace of new home sales in March. In February, the average 30-year fixed rate mortgage was 6.84%, while in March it fell to 6.65%. A new home sale occurs when a sales contract is signed, or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the March reading of 724,000 units is the number of homes that would sell if this pace continued for the next 12 months. New single-family home inventory in March continued to rise to a level of 503,000, up 7.9% compared to a year earlier. This represents an 8.3 months’ supply at the current building pace. This level of supply continues to be reasonable given that the resale, single-family months’ supply remains lean at just 3.4. The count of completed, ready-to-occupy homes available for sale increased to 119,000, up 34% from a year ago. However, the March data also is showing signs that the total amount of inventory in the new construction space has slowed given soft housing conditions at the start of 2025. For example, the count of new homes available for sale that are under construction (263,000 in March) is down 5% year-over-year and 6% lower than the non-seasonally adjusted peak count set in October 2024. The median new home sale price in March was $403,600, down 7.5% from a year ago. Sales were particularly strong at lower price levels. Compared to March 2024, new homes sales were 33% higher for homes priced below $300,000 and 28% higher for new homes priced between $300,000 and $400,000. Regionally, on a year-to-date basis, new home sales are up 12.9% in the South, but are down 32% in the Northeast, 18.3% in the Midwest and 6% in the West. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

New Home Sales Rise in MarchRobert Dietz2025-04-23T10:33:44-05:00

Who Influences the Purchasing of Building Products?

Eric Lynch2025-04-21T08:18:04-05:00

In a previous post, NAHB analyzed where builders and remodelers purchased products, regardless of who ultimately purchases them (themselves or subcontractors). In this post, the question shifts to who is most often responsible for the choice of particular products. When averaging over all 24 building product categories, 60% of builders report they had the most influence on product selection compared to 49% of remodelers. Still, these shares are ranked the highest within their respective sector. Both builders and remodelers reported similar shares of influence for subcontractors, dealers & suppliers, and architects. However, when it comes to the greatest influencer being the customer, this is more prevalent among remodelers (26%) than among builders (16%). When analyzing the top seven products most often chosen by the customer, there is a considerable gap between remodelers and builders. Most of these products (cabinets, lighting, carpeting, ceramic tile, countertops, other flooring) typically are chosen for decorative qualities which are rated quite important among customers. Please click here to be redirected to the full report. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

Who Influences the Purchasing of Building Products?Eric Lynch2025-04-21T08:18:04-05:00

Where Do Builders and Remodelers Buy Building Products?

Eric Lynch2025-04-14T08:19:20-05:00

The most common sources for products used in home building and remodeling are specialty retailers, lumber yards, and wholesale distributors, according to two recent NAHB surveys. The surveys include one of single-family homebuilders in the October 2024 NAHB/Wells Fargo Housing Market Index (HMI) and one of remodelers in the Q3 2024 NAHB/Westlake Royal Remodeling Market Index (RMI). Both surveys asked respondents where they purchase building products, regardless of who ultimately purchases them (themselves or subcontractors) When averaging across 24 building product categories, the top three major channels of distribution are roughly the same for both builders and remodelers. Specialty retailers, lumber yards, and wholesale distributors together account for around 70% of building product purchases. When analyzing the specific products purchased at lumber yards, the top products purchased by both builders and remodelers were basic lumber products including plywood & OSB, sawn lumber, and engineered lumber & I-joists. One major difference between builders and remodelers was the share of those who purchase products from home improvement centers. Remodelers are three times as likely to buy products at this channel of distribution compared to builders. Nevertheless, one specific product category, hand & power tools, is purchased at home improvement centers by a majority of both remodelers (68%) and builders (56%). Of those that do purchase hand & power tools at home improvement centers, 11% of remodelers purchased at least one other product there compared to 3% of builders. A subsequent post on who is most often responsible for choosing these products will come later. Please click here to be redirected to the full report. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

Where Do Builders and Remodelers Buy Building Products?Eric Lynch2025-04-14T08:19:20-05:00

Almost Half of the Owner-Occupied Homes Built Before 1980

Na Zhao2025-04-08T08:16:35-05:00

Around 48% of the U.S. housing stocks dates back to the 1980s and earlier. The median age of owner-occupied homes has climbed to 41 years in 2023, up from 31 years in 2005 according to the latest data from the American Community Survey[1]. The U.S. owner-occupied housing stock has aged rapidly particularly, particularly since the Great Recession, as the residential construction continues to fall behind in delivering new homes. Currently, new home construction faces headwinds such as rising material costs, persistent labor shortage and elevated interest rates. These challenges have contributed to an insufficient supply of new construction, making the nation’s owner-occupied housing stock significantly older over time. As a result, the aging housing stock signals a future growing remodeling market. Older structures require updates to add new amenities or need repairs or replacements of old components. Moreover, the lock-in effect from historically low mortgage rates during the pandemic period has led many homeowners to stay put and renovate their existing homes to accommodate the growing needs of their families. Over the long run, the aging of the housing stock implies that remodeling may grow faster than new construction. From 2020 to 2023, new construction added nearly 2.6 million owner-occupied homes, accounting for only 3% of total owner-occupied housing stock as of 2023. Relatively newer homes built between 2010 and 2019 took up around 9% of the stock, while those constructed between 2000 and 2009 made up 15%. In contrast, around 48% of the owner-occupied homes were built before 1980, including around 35% built before 1970. Due to modest supply of housing construction, the share of relatively newer owner-occupied homes (those built within past 13 years) has declined greatly, from 18% in 2013 to only 12% in 2023. Meanwhile, the share of older homes that are at least 44 years old has increased significantly, rising from 39% in 2013 to 48% in 2023. This shift further reflects the ongoing aging of the U.S. housing stock, highlighting the growing importance of the remodeling sector to address the growing needs of homeowners nationwide. [1] : Census Bureau did not release the standard 2020 1-year American Community Survey (ACS) due to the data collection disruptions experienced during the COVID-19 pandemic. The data quality issues for some topics remain in the experimental estimates of the 2020 data. To be cautious, the 2020 experimental data is not included in the analysis. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

Almost Half of the Owner-Occupied Homes Built Before 1980Na Zhao2025-04-08T08:16:35-05:00

Single-Family Housing Starts Hit 12-Month High in February

Jing Fu2025-03-18T10:19:07-05:00

Limited existing inventory helped single-family starts to post a solid gain in February, but builders are still grappling with elevated construction costs stemming from tariff issues and persistent shortages related to buildable lots and labor. Overall housing starts increased 11.2% in February to a seasonally adjusted annual rate of 1.50 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The February reading of 1.50 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Within this overall number, single-family starts increased 11.4% to a 1.11 million seasonally adjusted annual rate, the highest pace since February 2024. The multifamily sector, which includes apartment buildings and condos, increased 10.7% to an annualized 393,000 pace. While solid demand and a lack of existing inventory provided a boost to single-family production in February, our latest builder survey shows that builders remain concerned about challenging housing affordability conditions, most notably elevated financing and construction costs as well as tariffs on key building materials. On a regional and year-to-date basis, combined single-family and multifamily starts were 4.7% lower in the Northeast, 21.5% lower in the Midwest, 8.3% lower in the South and 20.2% higher in the West. Overall permits decreased 1.2% to a 1.46-million-unit annualized rate in February and were down 6.8% compared to February 2024. Single-family permits decreased 0.2% to a 992,000-unit rate and were down 3.4% compared to the previous year. Multifamily permits decreased 3.1% to a 464,000 pace. Looking at regional permit data on a year-to-date basis, permits were 30.1% lower in the Northeast, 2.3% higher in the Midwest, 2.1% lower in the South and 12.5% lower in the West. The number of single-family homes under construction in February was down 6.7% from a year ago, at 640,000 homes. In February, the count of apartments under construction increased 0.3% to an annualized 772,000 pace. It marks the first gain after 18 months of consecutive declines but was still down 20% from a year ago. There were 526,000 multifamily completions in February, down 15% from the previous year. For each apartment starting construction, there are 1.5 apartments completing the construction process. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

Single-Family Housing Starts Hit 12-Month High in FebruaryJing Fu2025-03-18T10:19:07-05:00

Builders’ Profit Margins Improved in 2023

Rose Quint2025-03-11T09:16:47-05:00

Profitability for single-family home builders reached the highest levels in more than a decade in 2023. Industrywide profit benchmarks are important because they allow companies to compare their financial performance against the entire industry. Doing so can guide resource allocation, budgeting, and target setting for costs and expense lines. More broadly, understanding industry benchmarks can lead to an improved business strategy and to higher financial results. On average, builders reported $11.3 million in total revenue for fiscal year 2023. Of that, about $9.0 million (79.3%) was spent on cost of sales (i.e., land, direct and indirect construction costs), which translates into an average gross profit margin of 20.7%. Operating expenses (i.e., finance, S&M, G&A, and owner’s compensation) cost builders an average of $1.4 million (12.0% of revenue), leaving them with an average net profit margin of 8.7%. This post summarizes the results from NAHB’s most recent edition of the Builders’ Cost of Doing Business Study. Based on historical survey data (performed every three years), the 20.7% average gross profit margin in 2023 was the highest registered since 2006 (20.8%). As a point of reference, builders’ gross margin sank to a record low of 14.4% in 2008 (i.e., during the housing recession), but bounced back steadily through 2017 (19.0%). The onset of COVID-19 in 2020 increased costs, causing builders’ average gross margin to drop (18.2%) for the first time since 2008. The 8.7% average net profit margin for fiscal year 2023 is the highest in this survey’s recent history, exceeding the 7.7% reported in 2006. However, increased use of financial incentives, such as mortgage rate buydowns, and cuts in home prices are likely to have caused this margin to shrink in 2024. The Cost of Doing Business Study also tracks builders’ balance sheets. On average, builders reported $7.2 million in total assets on their 2023 balance sheets. Of that, $4.5 million (62%) was financed by liabilities (either short- or long-term) and the other $2.7 million (38%) by equity builders held in their companies. Historical data show the average $7.2 million in total assets in 2023 was 23% lower than in 2020 ($9.4 million), and builders’ lowest asset level since 2010 ($6.2 million). But perhaps more important than fluctuations in the size of their balance sheets, the data reveal a long-term decline in builders’ reliance on debt to finance their operations: in 2006, 74% of their assets were backed up by debt; by 2020, the share was down 10 points to 64%; and by 2023, it dropped to a record low of 62%. Logically, the latter means builders are using more of their own capital to run their companies, as illustrated by their equity share rising from 26% of assets in 2006 to 38% in 2023. The NAHB Economics team will conduct a Cost of Doing Business Study for residential remodelers in the spring of 2025. If that is your firm’s primary activity, please consider participating in this confidential survey. We simply can’t produce benchmarks without your input. To participate, please complete this form. A summary of the most recent profitability benchmarks for residential remodelers is available in this blog post. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

Builders’ Profit Margins Improved in 2023Rose Quint2025-03-11T09:16:47-05:00

New Home Sales Slow in January 2025

Jing Fu2025-02-26T12:21:06-06:00

New home sales decreased in January to a three-month low, as housing affordability continues to sideline potential home buyers. Mortgage rates are expected to remain above 6% throughout 2025, coupled with elevated home prices, creating a significant affordability challenge for both first-time buyers and those looking to upgrade. Sales of newly built, single-family homes in January decreased 10.5% to a 657,000 seasonally adjusted annual rate from an upwardly revised December number, according to newly released data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The pace of new home sales in January is down 1.1% compared to a year earlier. A new home sale occurs when a sales contract is signed, or a deposit is accepted. The home can be in any stage of construction: not yet started, under construction or completed. In addition to adjusting for seasonal effects, the January reading of 657,000 units is the number of homes that would sell if this pace continued for the next 12 months. New single-family home inventory in January continued to rise to a level of 495,000, up 7.4% compared to a year earlier. This represents a 9 months’ supply at the current building pace. Completed ready-to-occupy inventory was at a level of 118,000, up 39% compared to a year ago. While the monthly supply of new homes is 9 months, there is currently only a 3.4 months’ supply of existing single-family homes on the market. NAHB estimates the combined new and existing total months’ supply rose to a 4.2 months’ supply in January. The market has not been near a 6 months’ supply, which represents a balanced market, since 2012. The median new home sale price in January was $446,300, up 3.7% from a year ago. It is the highest median sale price since October 2022. The Census data reveals a decrease in new home sales priced between $300,000 and $399,999, which made up 24% of new home sales in January, compared to 29% a year ago. Regionally, on a year-to-date basis, new home sales are down 60.0% in the Northeast, and up 7.1% in the West. New home sales remain unchanged in the Midwest and South. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

New Home Sales Slow in January 2025Jing Fu2025-02-26T12:21:06-06:00

Single-Family Home Size Increases

Robert Dietz2025-02-24T12:16:41-06:00

An expected impact of the virus crisis was a need for more residential space, as people used homes for more purposes including work. Home size correspondingly increased in 2021 as interest rates reached historic lows. However, as interest rates increased in 2022 and 2023, and housing affordability worsened, the demand for home size has trended lower. As markets expect some decline for long-term interest rates, will new single-family home size reverse and move higher in 2025? Data from the end of 2024 suggests this may be occurring. According to fourth quarter 2024 data from the Census Quarterly Starts and Completions by Purpose and Design and NAHB analysis, median single-family square floor area was 2,205 square feet, the highest reading since mid-2023. Average (mean) square footage for new single-family homes registered at 2,417 square feet. The average size of a new single-family home, on a one-year moving average basis, trended higher to 2,373 square feet, while the median size is at 2,162 square feet. Home size increased from 2009 to 2015 as entry-level new construction lost market share. Home size declined between 2016 and 2020 as more starter homes were developed. After a brief increase during the post-COVID building boom, home size has trended lower due to declining affordability conditions. As interest rates decline, new home size could level off and increase on a sustained basis in the quarters ahead. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

Single-Family Home Size IncreasesRobert Dietz2025-02-24T12:16:41-06:00

Gains for Custom Home Building

Robert Dietz2025-02-24T08:15:41-06:00

NAHB’s analysis of Census Data from the Quarterly Starts and Completions by Purpose and Design survey indicates gains for custom home builders after a period slight softening of market share. The custom building market is less sensitive to the interest rate cycle than other forms of home building. There were 47,000 total custom building starts during the fourth quarter of 2024. This marks a 7% increase compared to the fourth quarter of 2023. Over the last four quarters (2024 as a whole), custom housing starts totaled 181,000 homes, just below a 2% increase compared to the prior four quarter total (178,000 in 2023). Currently, the market share of custom home building, based on a one-year moving average, is approximately 18% of total single-family starts. This is down from a prior cycle peak of 31.5% set during the second quarter of 2009 and the 21% local peak rate at the beginning of 2023, after which spec home building gained market share. Note that this definition of custom home building does not include homes intended for sale, so the analysis in this post uses a narrow definition of the sector. It represents home construction undertaken on a contract basis for which the builder does not hold tax basis in the structure during construction. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

Gains for Custom Home BuildingRobert Dietz2025-02-24T08:15:41-06:00

Townhouse Construction Expanded in 2024

Robert Dietz2025-02-21T00:17:38-06:00

Townhouse construction expanded 10% during 2024, outpacing the rest of the single-family home building market. According to NAHB analysis of the most recent Census data of Starts and Completions by Purpose and Design, during the fourth quarter of 2024, single-family attached starts totaled 44,000. Over the last four quarters (2024 as a whole), townhouse construction starts totaled a strong 174,000 homes, which is 10% higher than the prior four-quarter period (158,000 in 2023). Townhouses made up 19% of single-family housing starts for the fourth quarter of the year, a data series high. Using a one-year moving average, the market share of newly-built townhouses stood at 17.3% of all single-family starts for the fourth quarter. With recent gains, the four-quarter moving average market share is near the highest on record, for data going back to 1985. Prior to the current cycle, the peak market share of the last two decades for townhouse construction was set during the first quarter of 2008, when the percentage reached 14.6% on a one-year moving average basis. This high point was set after a fairly consistent increase in the share beginning in the early 1990s. The long-run prospects for townhouse construction are positive given growing numbers of homebuyers looking for medium-density residential neighborhoods, such as urban villages that offer walkable environments and other amenities. Where it can be zoned, it can be built. Discover more from Eye On Housing Subscribe to get the latest posts sent to your email.

Townhouse Construction Expanded in 2024Robert Dietz2025-02-21T00:17:38-06:00

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