With the ongoing rise in interest rates, it appears that the housing market is beginning to cool off a bit. According to the Census Bureau, 2020 saw the construction of 912,000 single-family homes. If you're interested in beginning a construction project with professional home builders, here are some important things to know about the current housing market.
High Interest Rates
When interest rates go up it makes the buying process more challenging for folks financing their purchase. During a time when rates have already risen, but home prices haven't yet been adjusted for those changes, high monthly payments make buying a home much less attractive. There's usually a lull in home building and transactions with existing homes during this period. Once rates stabilize and home prices begin to reflect the effects of higher borrowing costs, the market typically picks up. As the housing market continues to move closer to this equilibrium, demand and inventory pressures begin to ease up.
Low Existing-Home Inventory
When rates rise, people might delay moving because they don't want to sell their homes in an environment where the cost of a new home is too high. This makes the market stagnate and the inventory of existing homes for sale drop. Home builders often see one of two extremes; it's either a lack of existing homes for sale causes a surge in new home building or high interest rates bringing everything to a halt. If you're in the market to buy a home without financing, you will likely find yourself in an enviable position.
Shorter Wait Times
Homeowners who opt to build during this period of fluctuation might be surprised by how much has changed since the low-interest rate building boom. The housing market is constantly changing, making it difficult to time the building of your new home. Now, with fewer people actively looking to move or build a home, they're finding their builders have shorter wait times and sourcing materials is less difficult. There are a number of advantages that come with building a new home during a lull. If you're ready to build your new home and don't want to have to fight for your builder's attention, now is an ideal time.