3/4/2023 0 Comments New home inventorySharga added: "If the builders had kept their pedal to the metal and we continued to see single-family residential housing starts increase, that would be more of a cause for concern. "If you look at the combination of homes completed and homes under construction, you're not really looking at an oversupply situation at the moment," Sharga said. In fact, he noted that homebuilders are cutting back on the number of housing starts as rising interest rates weigh on demand. The uptick in new home supply is the result of a backlog of building projects coming online - not overeagerness from homebuilders, Sharga said. Though observers could infer that the slight pullback in new home prices will continue to worsen because supply is abnormally high, Sharga said that such a decline wouldn't seriously harm the housing market because new home sales make up only about 10% of total home sales.Īnd while the supply of new homes is elevated, it isn't a cause for concern, in Sharga's view. That's because many current homeowners don't want to move unless they're forced to, Sharga said, given that rapidly rising mortgage rates have made getting a new house more expensive. After the housing bubble burst in the financial crisis of the previous decade, there was over 12 months of supply for new homes.Īlthough new home inventory has risen to 9.3 months, Sharga noted that there's still a relative shortage of existing homes since supply is about half of a normal period at three months. In a normal market, there's about six months of available supply, Sharga noted. Housing market collapses come when there's a far greater supply of homes than demand for them. There are six reasons why Sharga, who has studied the US real estate market for over two decades, said it's "extraordinarily unlikely" that home prices will suffer from a financial crisis-style drop of 20-30% anytime soon. "There's always a chance, but absent some economic catastrophe, it seems very unlikely that'll happen." Why homebuyers and homeowners can rest easy "The likelihood of another housing crash, as we saw in the Great Recession, is very, very slight," Sharga told Insider in a recent interview. However, Rick Sharga, the executive vice president of Market Intelligence at real estate data provider ATTOM, isn't concerned about a market crash, even as new home prices start to slide.
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