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COVID-19 Update

Will 2022 see stability return to the new homes market?

Due to the pandemic, in many ways the home building industry and customers who buy them have acted counterintuitively. However, the old adage is as true as it has ever been. Hindsight is always 20/20.

 

According to Mashvisor, “Many people, during the height of the coronavirus pandemic, predicted a housing-induced recession in 2020. In reality, there was an unexpected boom in real estate demand, the likes of which had not occurred since 2006. The fact that the housing sector boomed during a time of short-term hysteria and inflation could be an indicator of how the housing market has evolved.”

 

As usual, the coming year will neither be “feast or famine” for the residential construction industry, but rather a little of both.

For Builders: Cost of Construction Should Come Down

Most residential developers and homebuilders spent 2021 wringing their hands and wondering when the supply chain would return to normalcy. A big part of the problem with the low inventory in the new construction segment was the high cost of production. There was also an inflation problem, albeit short-term, affecting the manufacturing industry. This has driven up the prices of building materials for homes and even cars. In the remainder of the 2022 new homes market, we hope to see that bottlenecks in the supply chain will be fixed with continued economic growth, and many companies will restock their shelves.

 

Finally, in December 2021, there was news that supply chain issues are easing. “Epic port congestion is easing. Shipping prices are falling from sky-high levels. Deliveries are speeding up a bit. Businesses are still grappling with a troubling shortage of truck drivers. Critical components, including computer chips, remain scarce. And the Omicron variant threatens to put renewed pressure on supply chains. Still, there is evidence that bottlenecks are beginning to unclog.”

For Buyers: Everything Screams “Buy Now!”

Pummelled by record high prices and bidding wars for existing homes, in 2021 many potential home buyers saved their money. They were waiting until, inevitably, the supply/demand equation reconfigured. Even first-time buyers, with higher affordability and deposits saved in the bank, will likely pounce in the coming months, this has been compounded by the loss of the government’s Help to Buy Scheme in March 2023. If the availability of new and existing homes rises, this could make for robust demand.

In 2022, many experts think that “We will see these buyers re-enter the market in droves. Although prices may still be high in 2022, they would probably not appreciate at the high-flying rates we witnessed in 2020 and 2021.”

Not a Lot to Choose From

For hundreds of years, it’s been said: “Buy land. They’re not making it anymore!” This statement shows why most cliches are true. They tend to be accurate.

This lack of land - more accurately, land for residential construction - will be a trend for homebuyers and builders to grapple with in the coming year. In a recent National Association of Home Builders (NAHB) survey, “76% of builders reported that the overall supply of developed land in their areas was low to very low. This is an all-time record — by a wide margin — since NAHB began collecting the information in the 1990s. The previous record was 65%, recorded in 2018.

 

Barring any unforeseen calamities, 2022 could be a good year for homebuilders and buyers. However, the effects of inflation, new COVID variants, or other market disruptions could change everything. As we have learned over the past 2 years, nothing in this world is certain anymore!

 

Adapted from an Article at www.acmebrick.com