Low inventory or REOs and existing-homes provides builder confidence

The majority of housing market reports throughout 2012 were positive as home sales and prices have consistently been on the rise, while affordability from low mortgage rates have continued to spark consumer interest even throughout the slower season of fall and winter.

The majority of housing market reports throughout 2012 were positive as home sales and prices have consistently been on the rise, while mortgage records show affordability from low rates have continued to spark consumer interest even throughout the slower season of fall and winter. A new report from the National Association of Home Builders suggests that improvements will also be prevalent in 2013, though some sectors will still face challenges in returning to levels seen before the housing market slump.

One major challenge noted by David Crowe, chief economist for NAHB, will be demand from buyers.

"We are transitioning from a very low demand level, where most people hold themselves out of the marketplace, to a case where supply will start being the problem," said Crowe. "As we begin to build more homes to address that supply, the new home stock will be a much more important element of the recovery."

While new homes sales have been at their highest levels seen in five years, but many buyers have been attracted to the added discount provided by foreclosures, short sales and already-existing properties. Since these inventories have been declining quickly, builders have become more confident in the potential for starts and completions in 2013.



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