More house hunters—particularly move-up buyers—are being drawn to new-home construction in the COVID-19 pandemic, so much so that it’s driving a surge in construction across the country.
Single-family starts ended 2020 with the best year in home building since the Great Recession, and 11% higher than 2019.
Ultra-low mortgage rates and a shift in housing preferences—including a growing demand for larger spaces, home offices, and outdoor amenities—are driving the increase.
New-home construction will likely grow by 5% during 2021 and hit above 1 million housing starts for the first time in years.
Builders, however, are concerned about several challenges that could affect sales over the next few months, particularly related to rising construction costs.
Lumber prices, up 169% since mid-April, are significantly adding to the costs of building a new home.
Buyers are seeing the increases in home prices too: A median of $16,000 has been added to the cost of a newly built home from the increase in lumber prices alone.
Source: National Association of Home Builders’ data.
