Build vs. Buy: Why the Home Construction Market is on the Rise

Because of the strong economy, more Americans are on the hunt for new homes.

According to the United States census, the average cost to buy a home in the U.S. last year was roughly $376,000. On the other hand, HomeAdvisor reports that it will cost a homeowner, on average, about $286,000 to build a home. That’s a nearly $90,000 difference.

With numbers like that, it’s no wonder the demand for new home construction increased by 9.7% in January. And as a residential home builder, that increase brings a good outlook for your business in 2018.



2018 Housing Starts

Because of the strong economy, more Americans are on the hunt for new homes. Recently, though, there haven’t been enough houses on the market to meet demand. That’s where building comes in.

On Friday February 16, the Commerce Department released some housing stats that paint a pretty picture for 2018:

  • Housing starts were pacing 1.33 million in January. This is up from 1.21 million in December and a year-over-year increase of 1.24 million.
  • Single-family home construction rose 3.7%.
  • Apartment and condominium construction increased 19.7%.
  • All but the Midwest rose for home construction – Up 45.5% in the Northeast, 10.7% in the West and 9.3% in the South.
  • Finally, the number of building permits pulled rose 7.4% in January 2018. More building permits means, of course, that more and more construction jobs are on the horizon.

What’s Next?

The chief economist from Pantheon Macroeconomics, Ian Shepherdson, told USA Today that he expects to see the single-family housing construction builds soar into the middle of this year. And PwC Principal Scott Volling agreed. He told, “The surprisingly strong results for both permits and starts this month reflect the healthy demand that builders continue to see in the market, despite rising costs and affordability challenges.”

Shepherdson, however, does not feel the same about apartment and complex development. He expects that to peter out sometime in February.

But what does all of this mean for you, as the owner of a construction company going into these residential housing projects?

Because new house builds are beginning to take more of the market share, builders have a unique opportunity. You can start meeting with the homebuyers and create an end product that they will love from start to finish.

This isn’t without challenges, though. Redfin Chief Economist Nela Richardson told, “Obstacles to stronger growth remain with land and labor shortages and rising material costs. This translates into higher prices for buyers.”

As 2018 continues and the need for freshly built homes grows, keep your mind open to new opportunities. The market, as you can see, is filled with potential. You just have to grab it.

By | 2019-01-14T11:06:39+00:00 February 21st, 2018|Construction News, Thunderbolt University|