Newly constructed residences make up a small portion of the housing market, typically around 10%. However, builders have managed to increase this percentage throughout the current year and are projected to make further progress in 2024. Despite the presence of higher mortgage rates, sales of new homes are on the rise due to builders introducing more inventory into the market compared to pre-pandemic times. Conversely, the market for existing homes is experiencing a shortage of available properties, with inventory levels approximately half of what they were in 2019. Following two consecutive years of nearly 20% declines, sales of existing homes are expected to rebound next year with a baseline growth rate of 10% to 15%. If, by some chance, there is a surge in inventory, a surprisingly positive increase of 25% to 30% becomes a distinct possibility. The scarcity of supply is the underlying cause of multiple-offer situations for moderately priced to mid-range homes, highlighting the significance of inventory in stimulating the market.
Builders can contribute to the inventory by constructing new homes, while increasing the inventory of existing homes necessitates owners relinquishing the low mortgage rates they secured a couple of years ago. Rates ranging from 2.5% to 3% may be too enticing for some owners to give up. However, it is important to consider the significant life events that have occurred over the past two years, including 3 million marriages, 1.5 million divorces, 7 million births, 4 million deaths, and 7 million Americans reaching the age of 65. Many growing families or couples going through a divorce cannot afford to stay in their current homes. The desire to retire to a residence requiring less maintenance cannot be postponed indefinitely. People have a genuine need and desire to relocate. Even a slight decrease in mortgage rates could serve as a compelling incentive.
Over the past two years, we have witnessed the creation of 4 million net new jobs, along with 50 million job transitions. Numerous office workers are seeking homes that can accommodate new hybrid work policies.
The accumulation of stored inventory has been consistently increasing. Coupled with the customary reaction of demand due to reduced prices, the real estate market for home sales will experience enhanced dynamism.
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