The gap between sales and construction reached a record high in 2020, which likely means a slowing down in sales and growth in construction in 2021, according to a year-end report by the National Association of Home Builders.
“After a sharp decline in the spring, home building has staged a dramatic rebound,” the report noted. “In fact, supported by low mortgage rates, an evolving geography of housing preferences and favorable demographic tailwinds, housing demand has improved so quickly that the current difference between the pace of newly-built single-family home sales and for-sale single-family construction starts has reached a historic level.”
The study noted that lumber and material issues have delayed some projects, and many builders are averse to the idea of contracting home sales if they’re unable to deliver the final product. That means “the pace of growth for new home sales will need to slow and/or the rate of home building will need to increase to balance the market.”
Combined with rising resale prices, strong builder confidence and for-sale starts lagging behind sales, these trends point to a busy construction season in 2021.