Things are shaping up for homebuilders. In fact, one big name in the industry is projecting that 2024 will mark the “golden age” for homebuilding, thanks to falling mortgage rates and frozen existing home supply, among other factors.
David O’Reilly, CEO of megalith developer Howard Hughes Corp., told CNBC last week, “We’re going to have the golden age of new home construction” in 2024, even calling the new home market “extraordinary” in its current form.
He’s not wrong: Homebuilding activity has surged in recent months. In November, single-family starts jumped 18% over October.
Starts have now increased steadily for four consecutive months, and experts are predicting further increases in new home construction in the new year.
Why Homebuilding Will Surge in 2024
The National Association of Home Builders projects a 4% increase in starts across 2024, while Lawrence Yun, chief economist for the National Association of Realtors, is calling for a 13.5% increase in new home sales in the new year.
The bump largely boils down to mortgage rates, which have fallen quite a bit from their near-8% peak in October. Now at just 6.61%, average rates on 30-year mortgages are at their most affordable point in over six months.
The problem? It’s still not enough to spur existing homeowners to put their homes on the market. According to Zillow, as of July, about 80% of homeowners have an interest rate of 5% or less—so most property owners are not looking to trade in those low rates for today’s much higher ones (unless they absolutely have to). This constrains the supply of existing housing and pushes more buyers toward new construction instead.
There’s another perk buyers get with new homes, too: builder-offered buydowns. According to NAHB, 29% of homebuilders offered mortgage rate buydowns to buyers in October, and another 21% absorbed…