In June, there was a significant increase in the number of newly finished homes in the construction sector, as reported by the U.S. Census Bureau on Wednesday, providing a much-needed boost to a housing market struggling to keep pace with demand.
The completion of privately owned housing skyrocketed by 10 percent last month to 1.7 million, compared to May. This marked a 15.5 percent increase from a year ago when completions were around 1.5 million.
In addition, housing starts, which represent the beginning of home construction, also increased by 3 percent from May, although they were down by 4.4 percent compared to the previous year. Building permits, a leading indicator, saw a 3.4 percent rise in June.
The housing market has been hindered by a shortage of available inventory, leading to rising prices. Experts believe the U.S. is facing a shortfall of millions of homes to meet market demand. Any improvement in supply could help alleviate the limited inventory in the sector, according to analysts.
The increase in newly completed homes varied across different regions of the country, with only the West experiencing a decrease. The Northeast saw a 50.5 percent jump in finished properties in June, the Midwest recorded nearly a 54 percent increase, and the South saw a 2.3 percent improvement. The Western U.S. reported a 6 percent decline.
Maleyev pointed out that newly constructed homes typically have higher prices than pre-owned properties, but builders are becoming creative in attracting buyers.
“Newly constructed homes are usually priced at a premium compared to the resale market, but builders are now focusing on building smaller homes to appeal to first-time buyers,” she explained.
A shortage of supply, high prices, and elevated borrowing costs for home loans have been significant challenges for buyers. Recent trends indicate a decline in rates, leading to expectations that the Federal Reserve may further reduce interest rates by September, potentially encouraging more buyers to enter the housing market.
“Further rate cuts through the end of the year and into 2025 will likely stimulate demand for housing,” Maleyev added.