Fannie Mae: Upbeat Outlook for New Home Construction in 2020

Blog posted On December 31, 2019

Fannie Mae’s Economic and Strategic Research Group revised its expectations for the 2020 housing market.   The researchers predict single-family housing starts will accelerate 10% in 2020 after just a 1% growth this year.  Home buyers in many markets are competing over a limited number of existing homes for sale and turning to newly constructed homes. 

Existing home sales or resales usually make up the majority of real estate transactions accounting for about 90% of sales versus the 10% of new home sales.  However, with fewer homeowners moving, there are less and less homes available for sale.  Even with new home construction picking up, the report stated, “It will likely take several years, even at a more robust pace, for new construction to address the existing pent-up demand for additional housing, as suggested by a still-increasing share of 25- to 34 year-olds living at home with their parents.”

One of the advantages of building a new home over buying an existing home, is that you get to pick everything you want, including fixtures, flooring, and floorplan.  New homes will also come with the newest appliances, many of which are more energy efficient and come with warranties.  New homes are usually more expensive than existing homes, but when you buy an existing home with older fixtures and appliances, you may incur the cost of upgrading the home. 

Fannie Mae chief economist, Doug Duncan commented on the report, “we now expect single-family housing starts and sales of new homes to increase substantially, aided by a large uptick in new construction as builders work to replenish inventories drawn down by the recent surge in new home sales activity. 

When you’re buying a new home, it’s important to work with a lender that is experienced with new construction projects.  We offer extended rate lock programs to secure financing for up to six months of construction.  This longer timeline gives you greater flexibility during the construction process and protects you from unexpected incidents that may slow down home construction.  Our experience with national builders around the country has allowed us to establish a proven process for new home and construction lending. 

Sources: CNBC