In 2024, plenty of new trends are set to take hold of the residential housing industry. However, perhaps there’s nothing more prominent than the rise of new construction homes.
According to a recent Redfin report, nearly 31% of homes for sale in Q3 2023 were new constructions. That’s the highest share for any third quarter on record. Moreover, there’s no indication that this trend is slowing. If anything, the demand for these types of single-family homes is increasing.
To better understand what’s behind the increase and how the boom in popularity of these homes is influencing the broader real estate market, this article will explore how new construction homes are reshaping the industry in 2024.
Analyzing the Surge in New Home Popularity
The burgeoning demand for new homes is borne out of several factors. First and foremost, there’s a growing demand for homes featuring modern designs and amenities. First-time buyers, in particular, expect energy efficiency, smart home technology, and open-concept floor plans.
In many cases, older existing properties don’t or can’t have these features retrofitted, leading to buyers shunning them. In that respect, there’s also an element of future-proofing their investment against the ongoing home tech revolution led by IoT and AI.
There’s also a drive toward more flexible living spaces. Buyers of yesteryear viewed a home as merely a place to spend evenings and weekends. Remote work has changed everything, and now buyers require versatile living spaces that can be repurposed daily if necessary.
It’s not uncommon for today’s buyers to assess homes on their ability to deliver workout spaces, home offices, and entertainment areas rather than a specific number of bedrooms or bathrooms.
Previous years have seen stronger demand for existing homes, partly due to lower costs and the potential to renovate and add value. However, the pristine condition of new construction homes and the draw of their often well-equipped communities have seen their continued rise as a preferred option for several demographics, including young families, young professionals, and retirees. They’re certainly no longer the exclusive preserve of first-time buyers.
How the Boom in New Homes is Impacting the Housing Market and Wider Economy
The surge in popularity of new construction homes is undoubtedly having a ripple effect on the rest of the industry and the wider economy. While there’s still a sizable housing shortage, the boom in new construction starts is helping to bridge the enormous gap that began to develop in the late 2010s and exploded during the pandemic, when many sites had to shut down for an extended period.
The medium-term effect is expected to stabilize home prices, marking a step change from the recent sky-high price increases seen over the last few years. The increase in supply will certainly ease pressure, but it remains to be seen regarding the potential anchoring effect on prices.
Looking more broadly, the economy always benefits from a booming construction industry. The rapid increase in the number of these homes is driving job creation and stimulating growth in goods and services such as building materials, home furnishing, and real estate services.
Master-planned communities also bring much-needed upgrades to infrastructure, including roads and utility infrastructure, which often help bring higher consumer spending to the area.
Boom in Popularity Providing Both Opportunities and Challenges for New Home Builders
Of course, with this recent “explosion” in demand for new construction homes, new home builders face a raft of opportunities and challenges.
One of the biggest challenges is recruiting enough labor. The construction industry is currently experiencing a labor shortage, particularly in skilled positions. There’s been a significant degree of engineering talent migration to other industries, and worries about an aging workforce and an associated “brain drain” across the residential construction industry persist. *
That said, many exciting opportunities lie ahead derived directly from the increased demand. Leading builders are exploring all kinds of innovative technological solutions that may go some way to address the labor conundrum. 3-D-printed concrete foundations and walls are being tested at several sites nationwide, as are more modular constructions. This technique sees large parts of a home constructed in a factory before being transported and assembled on-site.
These innovations will likely drive future growth and efficiency in the sector, but they are still early-stage and won’t address the current labor market challenges. Builders with ongoing developments must address those problems head-on to meet near-term demands for 2024 and 2025.
New Construction Homes Set to Dominate in 2024
The seemingly unstoppable rise of new construction homes is having a significant impact on the residential housing market. Buyers are switching to these properties in their droves to better match their modern lifestyle demands, with existing properties no longer having the draw they once had, irrespective of location.
In the short term, not much is likely to change. But in the medium term, it’s hoped that the boom in new construction will help shore up supply, stabilize prices, and keep these modern homes within the budgets of a broad spectrum of home-buying demographics.
The growth is not without its challenges, especially for builders looking to plug skilled labor gaps. Technological innovation may provide the answer, but it will be years before it becomes widespread practice. In the meantime, leading home-building companies will have to employ intelligent strategies to maximize development opportunities while demand is high.
If you’re closely connected to the residential real estate market, adapting to these changes and planning strategically will be critical to capitalize on the opportunities presented by this evolving market in new home construction. Stay tuned for the latest updates as 2024 progresses.
Additional Sources: https://www.linkedin.com/pulse/brain-drain-from-engineering-construction-industry-may-harikrishnan-k/
