Housing Market Gets Good News About a Critical Problem

The number of new homes finishing construction soared in June, data from the U.S. Census Bureau showed on Wednesday, boosting a housing sector struggling to keep up with demand.

Last month saw the completion of privately owned housing skyrocket by 10 percent to 1.7 million compared to May. The June numbers were 15.5 percent higher than a year ago when completions stood about 1.5 million.

Housing starts, which refers to the beginning of home construction, also shot up 3 percent from May, though it was lower by 4.4 percent compared to a year ago. Building permits, a forward-looking indicator, increased by 3.4 percent in June.

The housing market has grappled with available inventory, which, experts say, has contributed to a rise in prices. Some housing economists have suggested that the U.S. is millions of homes behind meeting market demand. Any sign of improved supply could assuage the limited inventory the sector faces, analysts say.

“More newly built homes coming on line is good news for the extremely supply constrained housing market, but not all regions are seeing significant supply becoming available,” Yelena Maleyev, KPMG senior economist, said in a note shared with Newsweek.

The improvement in supply of newly completed homes cut across almost all regions of the country. with only the West seeing a contraction. The Northeast saw finished properties jump 50.5 percent in June, while the Midwest recorded close to 54 percent more homes delivered by builders in the market. The South saw an improvement of 2.3 percent. The Western U.S. reported a drop of 6 percent.

Maleyev noted that new homes tend to be priced higher than previously owned properties, though builders are getting innovative in their push to attract buyers.

“Newly built homes tend to be priced at a premium to the resale market, although builders have been shifting to building smaller homes to appeal to first-time buyers,” she said.

Lack of supply and higher prices have been two core obstacles buyers have confronted when trying to purchase a home, along with elevated borrowing costs for home loans. Recent trends suggest that rates are declining, and expectations have heightened that the Federal Reserve may begin further slashing interest rates by September, which could motivate more buyers into taking the plunge into homeownership.

“More rate cuts into the end of the year and 2025 will help boost demand for housing,” Maleyev said.