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Will This Be a Good Year For Residential Builders?

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If you’re a builder focusing on newly constructed residential homes, 2018 could be a great year for business.

Here are some of the top reasons why experts think this year will be a strong one for the construction industry, and how you can capitalize on the expected growth.

Demand for affordable homes will continue in 2018

There’s been a huge demand for new construction homes over the past several years, and it doesn’t seem as if that’s changing. However, the most demand will be for more affordable homes.

According to Zillow’s chief economist Svenja Gudell, “Builders won’t ignore this hungry market, and we’ll start to see a rise in new construction at the more affordable end, instead of all the luxury buildings we’ve seen lately.”

Single-family homes are also in demand

Trulia’s chief economist Ralph McLaughlin also had some thoughts to share about what’s in store for 2018, explaining, “When it comes to new home building activity, 2017 turned out to be the best year for permits, starts and completions in a decade. The continued climb was led by single-family homes, which was exactly the type of new inventory frustrated homebuyers yearned for last year. Elevated levels of homebuilders’ confidence combined with persistent low inventory should make 2018 a ripe year for single-family construction to grow.”

With this in mind, builders would be wise to focus on building more affordable starter homes and more single family homes.

Builders still face high costs, so suburbs will grow

When searching for land for your next build, look to the suburbs. Gudell adds to her previous statements, explaining that, “…builders are also facing high costs, so instead of adding density in cities where zoning laws and land costs often preclude affordable building, we’ll see the suburbs grow and expand outward.”

Luckily, the availability of land in the suburbs aligns with another trend: The Semi-Suburb Real Estate Trend: Millennials Moving From Cities.

Home prices will keep rising, but at a slower pace

Experts expect home prices to keep rising throughout the year, albeit at a slower pace than in past years. Robert Dietz, senior vice president and chief economist for the National Association of Home Builders (NAHB) says that, “NAHB sees continued modest yet positive growth prospects for 2018. We should continue to grow, but at below 3% rates.”

Experts like Svenja Gudell anticipate more growth than Dietz – she expects home prices to increase by 4.1% this year in 2018, which is slower than the current annual pace of 6.9%.

We won’t know the exact numbers until the year is over, but all signs point to a good year for residential construction builders, especially if they focus on affordable housing and single-family homes.

 

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