New construction is a major driver of real estate markets nationwide. Without it inventory levels remain lower than normal and house prices can’t help but rise. In order to look forward to what is expected for the spring building market you have to first understand what it takes to build a home.
With the average new home requiring over 20 subcontractors to complete, it is no wonder homes are taking longer to build than normal. If there is also a shortage of one or two of these subcontractors it can delay completion of the home dramatically.
According to the 2014 Survey of Construction (SOC) from the Census, it shows that the average time to completion a single-family home is approximately 7 months. This includes about 6 months to physically build the home and about a month from the authorization to build to the actual start of building. Of course, this estimate depends on the geographic location of the home being built, as well as the permitting processes in that area.
Houses that are built for sale, rather than custom built homes, on average take 6 months from the time the building permits are issued to the completion of the home. On the other hand, homes being built by owners took far longer at an average of 11.5 months.
The reason real estate agents need to know this information is because they have to know what inventory is becoming available in order to fully understand where prices may go in the future of their local real estate marketplace. One of the easiest ways to do this is to follow the building permits. By knowing what has been submitted for permitting and by knowing the number of homes that are permitted you can get a fairly good idea of what inventory will be hitting the market in approximately 6 to 7 months.
With inventory challenges being so difficult this past year it is imperative that agents today know their local new construction forecasts. Another great opportunity for agents is to get to know the builders of these homes and then to provide them with market updates of the neighborhoods or communities that their upcoming building project or new home will be built in. Let these builders know that this is your area of expertise and that you would love to provide them with any data they might need from the MLS during their project’s duration.
The key here is to build a strong relationship with the builder by helping them get market information without any strings attached. Let them know you are excited about their upcoming property and that you would love to check it out as it is being built, so that you are the first to know about it. That way you can present it to possible buyers as soon as the home is complete. Your strong interest in their project will certainly work to your benefit.
I have often said that to know the health of any market you must first track the new construction in your market. Savvy agents keep track of new construction!