The pace of new construction is one of many gauges of the state of the current housing market, along with home prices and the volume of sales. Moreover, the kinds of new homes under construction can tell us about the health of the housing recovery. The types of new homes presently being built suggest that housing growth continues, with initial signs of optimism for one of the market’s key weaknesses in recent years: lack of first-time buyers.
A persistent challenge for housing during the post-recession period has been reduced and delayed levels of household formation. This has had a particularly strong effect on demand for owner-occupied homes. Even when new households have formed among younger individuals and families, they are more likely to form and remain as renters for longer periods of time than prior generations.
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As a result, builders of new single-family homes have constructed homes for the demand that exists, which has been disproportionately higher-end buyers, who are more likely to have savings for a down payment and the income necessary to support a mortgage. This change in the market mix for new homes is clearly seen in Census data reporting the typical/median new home size. More here.