The new construction housing market is building strength, which may lead home prices higher through 2013.
According to the National Association of Home Builders (NAHB), U.S. homebuilder confidence remains elevated as compared to recent years. It's a turnabout which reflects an improving domestic economy plus a growing pool of buyers whom are buying homes faster than builders can build them.
The best "deals" in new construction may be the ones you get today. By 2014, the market may be less friendly.
In March, for the seventh straight month, the NAHB reports its Housing Market Index (HMI) over 40. The builder confidence metric, which is scored on a scale of 1-100, slipped two points in March to 44.
The dip marks the second consecutive easing for the homebuilder confidence metric. Previously, the HMI had been on an 8-month win streak, stretching through most of last year.
Builders cite rising materials and labor costs as one reason for the recent drop. The improving U.S. economy has rendered homebuilding more costly, which can affect a builder's bottom line.
However, it's a scenario which has also fueled expectations for a strong 2013. By region, confidence is strong as compared to March 2012 :
Furthermore, the nation's homebuilders continue to experience strong foot traffic through model units, and are seeing a certain buyer "urgency"; the result of rising mortgage rates and a growing realization that the housing market is in recovery.
There are fewer homes for sale today than during any point in the last decade. It's no surprise, therefore, that homebuilders expect more sales over the next six months than during any six-month period since 2006.
For home buyers, this can be bad news. With tighter supply comes higher home prices.
After several years of slow growth, the U.S. economy is finally beginning to expand. Job growth has reached 29 consecutive month, business investment remains strong, and the housing market, which has long been a laggard, is more than one year off of its bottom.
For buyers of new construction, economic growth will contribute to higher home prices through 2013. But that's not the only whammy. Rising mortgage rates will weigh on buyers' wallets. Mortgage rates are already off to their worst annual start since 1996, and rates are projected to reach 4.4% later this year.
Every 1 percentage point increase in mortgage rates robs 11% of your home purchasing power. Therefore, if you're among the many U.S. home buyers considering new construction, the "best deals" may be the ones you get today.
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