One weekend last month, Ben Caballero happened by a block in Argyle, Texas, where four home builders had set up model homes. Both sides of the street were lined with cars. Unfortunately, builders are so far behind in construction these days that anyone who signed a contract that weekend probably won’t be able to move into their new residences until late spring or early summer.
“Builders simply can’t build homes fast enough to meet the remarkable demand,” says Caballero, whose HomesUSA is the broker of record for dozens of builders in four of Texas’ biggest markets. And it’s not just happening in the Lone Star State, but everywhere.
Usually, sales and new home starts move almost in lockstep. But these are not normal times. In its latest poll, marketing and research firm Zonda found that 30% of builders reported taking “weeks longer” to start work. And 6% said they were “months” behind.
According to Robert Dietz, chief economist at the National Association of Home Builders, by the middle of last year, sales outpaced the start of construction by the largest gap ever. By October, that record-breaking gap had widened even further. And by November, the count of sold-but-not-yet-started houses was up 69% from a year earlier.
“The gap is unprecedented,” says Dietz. “There is no comparable period in the data going back to 1963.”
Although new home sales slipped at bit in November, they were still 21% higher than a year ago, as demand continued to be supported by low interest rates, a renewed consumer focus on the importance of home, and rising interest in lower-density markets like suburbs and exurbs.
On net, sales were up 19.1% for the first 11 months of 2020. But starts have failed to keep pace. The spread between sales and starts is even greater than Census Bureau figures indicate, Dietz says, because the government’s count includes custom houses and those built specifically for rent.
Dietz indicates some slowing in sales is necessary, and believes builders may be pulling back a tad on taking new contracts until they can catch up. “Builders don’t want to get too far out over their skis,” he said in December…more.