Homebuilders are foreseeing a decline in demand and the number of new homes to be built in 2023. This is reflected in an overall drop in the number of building permits, which have declined dramatically over the past year. With interest rates on the rise and the price of existing homes falling, there is simply less demand for the construction of new homes.
Looking at the Numbers
According to data from the U.S. Census Bureau, the number of new housing projects for single-family homes dropped by 19% in September compared to the same time last year. At the same time, the number of new building permits also dropped about 17% compared to the same time in 2021. Meanwhile, the number of construction projects being canceled has increased dramatically, going from 15% in the second quarter of 2022 to 24% in the third quarter.
Interpreting the Numbers
What this generally means is that the drop in the housing market has also caused people to put plans of building new homes on hold. This has resulted in fewer people filing for permits to construct new residences, as well as fewer people bringing those housing projects to completion. The increase in canceled projects, in particular, is a sign of declining interest in new homes.
Why This is Happening
The primary reason for the decline in new construction is the increase in interest rates for mortgages. As interest rates go up, mortgage payments also increase, making it more “expensive” to take out mortgages even as home prices are generally dropping. This has caused many people to avoid purchasing new homes when they might have been interested before, as well as canceling projects they fear they will not be able to sell.
What This Means For You
If you are looking to buy a home, you will likely need to pay more than you might have anticipated thanks to higher mortgage interest rates. If you are looking to sell, you could face difficulties due to fewer buyers willing to pay for higher interest loans. That is why you should consider potential alternatives to the traditional home sales process, which can help you to get a good deal that might not otherwise be available.
At Liongate Homebuyers, we assist our clients with a variety of services related to buying and selling real estate, including purchasing homes for cash. We have experience handling real estate financing, especially for developers and house flippers. If you are interested in selling your home for cash, please contact us at 516-548-6553, or visit our contact page.
