Home Building Market Showing Signs of Strength

When the housing boom went from its peak in July 2006 to the lowest lows of the bust in 2011, new home sales set record lows. Then, with single-family building permits on the rise in 2012, builders started hammering away again. New pre-sold and speculative (spec) homes were taking shape across the country.

According to a joint release from the US Census Bureau and US Department of Housing and Urban Development (HUD), an estimated 651,400 housing units were completed in 2012. This is 11.4 percent (±4.6%) above the 2011 figure of 584,900. For comparison, prior to the market peaking, 2.5 million housing units were built in 2005. It has been estimated that we need around 1.5 million new housing units per year to accommodate population growth, the desire for vacation homes and to replace those that are demolished.

Overall, home sales have been on a sustained upward trend since last year. Fueled by pent-up demand and a generally improving economy with job creation, the uptick in sales can also be attributed to favorable affordability with super low interest rates and rising rents. As a result, the dynamics of supply and demand have increased the need for new construction since the US population has been growing much faster than housing stock during the last five-plus years.

An estimated 367,000 new housing units were sold in 2012. This is 19.9 percent (±4.8%) above the 2011 figure of 306,000. The seasonally adjusted estimate of new housing units for sale at the end of December was 151,000, representing a supply of 4.9 months at the current sales rate, according to the joint report (a 6-month supply is considered normal).

While a part of the new construction slowdown was certainly due to the excess of houses built during the late boom years, it’s also important to consider the fact that some of it was also due to the fact that fewer households were being formed during the weak economy - multiple generations shared expenses under one roof.

Now, as the economy as a whole continues to improve, more people who have been “doubling-up” will have the opportunity to find new jobs and move out. These projections of increased housing demand mean more buyers in the market for builders to sell to, making them optimistic about the year ahead.

In their efforts to make every attempt to meet the needs of buyers today - whether they are looking to build from the ground up (presold) or find the new construction home of their dreams already built or nearing completion (spec homes) - builders know buyers typically choose new over existing homes for the same top reasons – energy efficiency, customization, modern elevations and floor plans, neighborhood planning and development plus builder incentives and warranties.

Plus, in today’s competitive marketplace, builders also need to deliver the latest trends and products at the best possible prices.

Perhaps that’s why last month’s International Builders’ Show (IBS) in Las Vegas exceeded the expectations of the National Association of Home Builders (NAHB) attendance-wise. The year’s biggest event for builders, remodelers, developers, architects, designers and other industry professionals, IBS attendance soared past 62,000, well above NAHB’s estimate of 50,000 – another good sign for home building.

Among all the cutting-edge products on display from manufacturers across the globe, the growing demand for safer, healthier and more sustainable homes was a common thread. The NAHB’s official IBS home demonstrated this with solar hot water, photovoltaic roof panels, closed spray foam insulation, water sensitive irrigation, tankless hot water heaters, hydronic air handlers, intelligent fireplaces, sustainable building materials, energy star appliances and low E energy efficient windows. Plus, the homeowner can monitor, manage and control security systems, climate, TVs, music, lighting, shades and more from an iPhone, iPad or laptop.

This particular home exceeded the standards for “Emerald” certification, the highest rating under the National Green Building Standard and boasts a HERS Index of 33 (consuming 67% less energy than if it were built to Indiana’s current code, earning “Platinum” certification, the highest under the US Green Building Council LEED for Homes program).

Another key trend highlighted throughout the IBS included an overall shift toward simpler living. Look for low-maintenance design paired with clean, contemporary looks that blend classic textures with pops of bold color and elements of sparkle.