When the country shutdown in March of 2020 because of the pandemic, there was much speculation about what would happen to the real estate market. Millions of homeowners went into forbearance and all of a sudden there was a lot less money in circulation. To stimulate the economy and compensate for the temporary loss of income to one of the country’s cornerstone industries, the Federal Reserve lowered interest rates to less than 3%, an all time record low. This stimulated a wave of buying that has pushed housing inventory levels to record lows.
This lack of inventory has forced buyers to be creative with their offers and in many cases has pushed them to look for different options, including relocation and new construction. However, even new construction can’t keep up with pace the demand.
New Home Sales Reach New High
Being a homebuyer right now is not easy. There is a lot of competition for houses and not many houses to choose from. This has created a very strong seller’s market with elevated housing prices. Nevertheless, some buyers are relentless and have asked their Realtor® to bring out their bag of tricks and use any and all of them to get them the house they want. But even when Realtors® work their magic, it may not be possible, to make a buyer’s wish come true.
So one option many homebuyers are turning to is new construction. However, even new construction is having a hard time keeping up with the intense demand for homes. In fact, according to Realtor® Magazine in March 2021, new home sales had gone up nearly 21% from the previous month (Realtor® Magazine, 2021).
To get a better idea of how strong the demand is at the moment, we spoke with Jeremy Needelman, General Sales Manager, for the Pulte Group for Southeast Florida.
Straight From the Builder's Mouth
Pulte, one of the nation’s largest builders has multiple construction projects in Florida and two right here in and near Oakland Park, Oak Tree Homes and Cassia Estates.
We asked Needleman the following: Is Pulte in general experiencing this strong demand? If so, how has it affected sales? Can you provide examples with the local projects like Oak Tree?
Pulte is experiencing very strong demand. As a publicly traded homebuilder, PulteGroup provides quarterly reporting on our business results. We just recently reported our First Quarter results of 2021, which included growth of new home purchases of 31% and a 50% increase in Backlog (Homes under contract to be delivered). This speaks to the incredibly high demand for new construction homes across the country. Locally, at Oak Tree we have seen incredible demand at all price points.
As a Realtor® who has taken a keen interest in Oak Tree, I have tracked the pricing of the homes at Oak Tree and just a year since it’s launch home prices have gone up between 22% and 37%! In simpler terms, that means that a house that could have been purchased in 2020, for example the Stellar model, for $579,990 base price now costs, $790,990! That is a 36% or $211,000 increase in just one year.
A few of the new homeowners at of Oak Tree have shared with me that if they had not bought in the beginning, they would have been priced out by the steep increases over this last year.
Increased Home Prices Have Not Affected Demand
Many people conclude that the reason for the increase in prices is due to corporate greed. However, that is not the case. Needelman explains: “Lumber shortages definitely get the headlines, but, homebuilders nationally are experiencing supply-chain challenges in almost all areas. Steel, Concrete, Drywall…you name it. In 2020, majority of the country went into shutdown mode in the face of COVID, the result of which was a reduced capacity on production“. In other words, the decreased supply chain coupled with a greater demand for the same materials has driven prices up. This in turn has impacted the price of homes and the rate at which builders can deliver those homes.
Nevertheless, despite the increase in home prices, the shortage of materials and longer delivery times, demand has not abated. In fact it has become stronger and more competitive, forcing builders to do their best to keep up with the intense demand.
Building Faster is Not the Answer
I asked Needleman: “How is Pulte handling the strong demand?” to get a better idea of what builders are doing in order to deliver homes in this high pressure environment.
PulteGroup is staying laser-focused on our commitment to quality. We have ramped up our homebuilding operations to match pace with our sales efforts. That said, we are also limiting the amount of homes we will sell each month, to ensure that we can continue to provide our best-in-class customer service, and deliver our homes within the expected timeframe. We could sell significantly more homes each month, but, if we can’t deliver them at a level we are proud of, we are not being true to our core.
The trend of selling less homes is one that builders around the state have embraced in order to insure a steady delivery of homes. Regardless of which builder I speak with, they have all shared that they are releasing less homes for sale in order to keep up with the demand. Ironically this strategy, while not intentional, but rather necessary, creates a pent-up demand that charges the competitive environment and drives home prices up even further. Given this reality we can expect that demand will continue to outpace construction for a while still.
Even though this is true, if you want to buy a new construction home, there are ways to increase your chances of success and buying the house of your dreams.
What to Do if You Want to Buy New Construction
Given the highly charged competitive environment for new construction I asked Needleman what tips he would give new construction homebuyers and he said: Only one… Call Desiree Avila!
Well, I can’t argue with that, of course this great advice (wink, wink), so definitely take it! And take to heart the tried and true advice below.
1. Be the first! If you are interested in a new construction project, get in on the ground floor. You may have put yourself on the builder’s VIP list, but that may not be enough as they have 1000s of people on their list. Get a reputable, local Realtor® with new construction experience to be on guard and ready to get you one of the first appointments once the sales center opens.
2. Have your deposit ready. Ask your Realtor® to get all the information they can about the development so you can be ready to put down your deposit once you go into the first meeting with the salesperson. Waiting will cost you in more ways than one. You may miss out on your preferred lot, or you may have to pay more down the road for the same house.
3. Have your financing ready. Make sure you are prequalified and ready to sign the sales contract. With the strong demand, builders will not wait for you to get pre-approved, have it ready to go!
Sources:
“New-Home Sales Reach 15-Year High.” Realtor Magazine, 26 Apr. 2021, magazine.realtor/daily-news/2021/04/26/new-home-sales-reach-15-year-high.
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