New home sales ‘exploding’ as homebuilders race to meet demand
(Press Release) COLLEGE STATION, Tex. (Real Estate Center) – New home sales are “exploding,” says a Texas housing expert, and homebuilders can’t keep up with the demand. This means home prices will continue to go up as existing supply shrinks.
“Now is a good time to buy a home,” says Dr. Jim Gaines, chief economist for the Real Estate Center at Texas A&M University. “There are many other reasons why that’s so.
“Interest rates are low, mortgage lenders are generally approving loans easily, and future prices will be higher. Market demand is now focused on the middle- to higher- income groups who have remained employed during the pandemic. This means higher-priced homes have been more active than lower-priced homes sought by workers more impacted by COVID-19.”
The supply of available properties is the primary restraint on today’s housing market, said Gaines. Aging in place, the high number of refinancings at low interest rates, and lingering fear about COVID make sellers less aggressive.
“The homebuying process can be done completely online without face-to-face communications, he said. “Most people would probably prefer not to do business remotely, especially older millennials, but the younger age group is much more receptive. Service providers are accommodating the changes in processes and technology.”
The Real Estate Center housing expert isn’t worried about interest rates either.
“It’s not likely the Federal Reserve will increase interest rates anytime soon,” said Gaines. “They are on record as saying they will allow inflation to go to 3 percent or more and stay there for a while to get the overall economy moving.”
Millennials are a big factor in the current housing market, said the Center’s chief economist.
“Millennials are not sitting out the housing market,” said Gaines. “The Real Estate Center just reported record homeownership rates for second quarter 2020.
“There’s a bifurcated market, especially among the millennials. The better-educated group with jobs that continue during the pandemic are active and now acquiring homes. The other part of the millennials, including the very youngest segment of the cohort, may have had jobs more susceptible to closing and simply are going to have to get through the recovery process before becoming homeowners.”
When evaluating the healthiest housing markets, Gaines said buyers should consider the types, distribution, and continuity of jobs; income distribution; and local land costs.
A new study by WalletHub compares 300 cities of varying sizes for 24 key indicators of housing-market attractiveness and economic strength. Three Texas cities made the top ten best real estate markets. Frisco is No. 3, Austin No. 7, and Denton No. 9.
Funded primarily by Texas real estate licensee fees, the Real Estate Center was created by the state legislature to meet the needs of many audiences, including the real estate industry, instructors, researchers, and the public. The Center is part of Mays Business School at Texas A&M University.
