It’s been an up-and-down year thus far in the Southeast U.S. for home building. But May sales numbers indicate the region is finding its sweet spot.
Housing economy expert John Hunt, president of MarketNSight, recently noted a strong rebound in housing contracts across much of the Southeast, following a three-month lull earlier this year.
“Sellers dropped prices between February and May to hit the price the market would bear,” said Hunt. “This is why we see such strong May sales data. Home prices dropped to levels buyers could afford … The market is moderating and this is the new normal.”
Hunt anticipates about 5% growth over last year, despite a widespread lot shortage.
“We’re burning through our lot inventory, and the cost of the remaining available lots has been driven up significantly,” said Mark Konter, vice president of Konter Quality Homes in Savannah, Ga. “The cost to develop new lots has risen dramatically, too.”
In the Savannah market, Konter says supply has decreased so quickly that it’s been difficult to gauge demand. But he expects demand will continue to outstretch supply in the near term, which can be a good thing for business — but only to an extent, he says.
“If we continue to see heavily rising costs, we run the risk of the market turning on its head, and then [we] just have a really expensive product,” Konter said. “For us right now, it’s sustainable. But there’s certainly a concern that rising home prices will eventually begin to curtail demand if cost increases aren’t held in check.”
The Atlanta market is relatively close to keeping up because of legacy lot inventory in outlying areas, according to Hunt. However, as development cost increases outpace income growth in the area, new home sales will likely begin to slow.
For more insights on new home sales nationwide, including why the average monthly sales between March and May was near a post-recession high, visit EyeOnHousing.org.