Advertiser Disclosure

advertising disclaimer
Skip to main content
construction home

Homebuilding: 2020 Year in Review

Nov 04, 2020 by Marc Rapport
FREE - Guide To Real Estate Investing

Take the first step towards building real wealth by signing up for our comprehensive guide to real estate investing.

*By submitting your email you consent to us keeping you informed about updates to our website and about other products and services that we think might interest you. You can unsubscribe at any time. Please read our Privacy Statement and Terms & Conditions.

In January, the National Association of Home Builders (NAHB) predicted that new home sales would reach 708,000, up 2.5% in 2020 from 2019, the first year sales would surpass 700,000 since 2007.

Single-family housing starts, meanwhile, were predicted to increase more than 3% from 2019 to about 920,000 units, still "significantly less than the 1 million to 1.1 million units that demographics would support," the big trade group said in that report.

NAHB Chief Economist Robert Dietz said then:

Low resale inventory, favorable mortgage rates, historically low unemployment, and accelerating wage growth are driving builder sentiment and point to single-family production gains in 2020. At the same time, builders are still underbuilding as they continue to struggle with rising construction costs stemming from excessive regulations, a chronic shortage of workers, and a lack of buildable lots. These affordability headwinds are impeding more robust construction growth.

The results blow past the estimates

Now add a staggering pandemic and fast-forward 10 months. Despite temporary shutdowns in some areas and historically high surges in unemployment, the combination of historically low interest rates and soaring demand saw single-family housing starts in September hit a rate of 1.1 million, according to figures released Oct. 20 by the U.S. Department of Housing and Urban Development (HUD) and the Census Bureau.

Of that report, Dietz says now: "Demand is being supported by low interest rates, a suburban shift in demand, and demographic tailwinds. However, headwinds due to limited building material availability is slowing some construction activity despite strong demand, with authorized but not started single-family homes up 22.4% compared to a year ago."

Those headwinds again. Despite them, new home starts have reached the level NAHB economists said in January demographics indicate would support and then some, and new-home sales have been similarly strong.

On Oct. 26, the Census Bureau and HUD said September sales of newly built homes were at an estimated annual rate of 959,000 units, soaring past that estimate of 708,000 made at the beginning of the year and helping to drive the median sales price up to $326,800.

Soaring new-home sales reflect the greater market

That sales clip was more than 30% faster than September 2019, as the new construction market continues to reflect the frenzied activity in the much larger market for existing single-family homes. The National Association of Realtors (NAR) reported on Oct. 22 that existing home sales grew for the fourth consecutive month in September to a seasonally adjusted annual rate of 6.54 million -- up 9.4% from the prior month and nearly 21% from a year ago.

The NAR said the median existing-home price was $311,800, up nearly 15% from a year ago. Total housing inventory was at 2.7 months, another record low.

More of the same in the immediate future

Looking ahead, the NAHB reports builder confidence is at a record high, understandably enough given the high rates of both construction and sales.

Also at record highs, however, are prices for lumber, which the NAHB said has added an estimated $16,000 to the average price of a new home.

That could cut into the profits that a new home would bring, but then, if demand continues at its current pace and home prices continue rising, investors may hardly feel that extra cost, whether they're building a home to sell or occupy.

Unfair Advantages: How Real Estate Became a Billionaire Factory

You probably know that real estate has long been the playground for the rich and well connected, and that according to recently published data it’s also been the best performing investment in modern history. And with a set of unfair advantages that are completely unheard of with other investments, it’s no surprise why.

But those barriers have come crashing down - and now it’s possible to build REAL wealth through real estate at a fraction of what it used to cost, meaning the unfair advantages are now available to individuals like you.

To get started, we’ve assembled a comprehensive guide that outlines everything you need to know about investing in real estate - and have made it available for FREE today. Simply click here to learn more and access your complimentary copy.

The Motley Fool has a disclosure policy.