New-Home Construction Surges to Post-Great Recession High in October, Driven by Rise in Single-Family Starts

The numbers: U.S. builders started construction on homes at a seasonally-adjusted annual rate of 1.53 million in October, representing a 4.9% increase from the previous month’s figure, the U.S. Census Bureau reported Wednesday.

Permitting for new homes occurred at a seasonally-adjusted annual rate of 1.545 million in October, unchanged from September.

Economists polled by MarketWatch had expected housing starts to occur at a pace of 1.49 million and building permits to come in at a pace of 1.57 million.

What happened: The upsurge in housing starts was driven by a 6.4% rise in single-family starts, as multifamily construction activity dipped once again, this time by 3.2%.

All regions except the Northeast experienced an increase in housing starts despite rising coronavirus cases across many parts of the country, led by the 12.9% increase in the South. Permitting rose slightly in the South, West and Midwest, but fell markedly in the Northeast.

The big picture: The housing starts report follows yesterday’s release of the November home builder confidence index from the National Association of Home Builders. The index inched higher for the fourth consecutive month, demonstrating the upbeat outlook in the construction industry.

Indeed, virtually every home builder is seeing rising sales as Americans look to leave urban areas for larger homes in the suburbs only to find very few existing homes up for sale.

But builders naturally face roadblocks as they attempt to ramp up the pace of production. There’s only so much skilled labor to go around, and the availability of buildable lots and supplies also puts constraints on the speed with which they can construct new homes.

Of course, home-building firms aren’t necessarily complaining about this. “Those operating in many other sectors of the economy would love to have such problems,” noted Joshua Shapiro, chief U.S. economist at financial consulting firm Maria Fiorini Ramirez.

What they’re saying: “Demand has been boosted by record-low mortgage rates and a sudden shift in preferences toward larger homes with more space outside the core of major cities. And, there simply has not been enough resale supply to meet this demand,” Robert Kavcic, senior economist at BMO Capital Markets, wrote in a research note.

“Home builders are walking a tightrope between increasing costs of labor, materials and land, and eager buyers seeking larger homes in suburban neighborhoods. While they are well-positioned to meet the needs of buyers in these neighborhoods, the volume of new construction still lags the number of buyers,” said George Ratiu, senior economist at Realtor.com.

Source: realtor.com

What Is New-House Smell? A Reality Check on the Risks, and How To Get Rid of It

While most of us are familiar with new-car smell—that distinct scent of a brand-new automobile—home buyers might have caught a whiff of another scent entirely during their home-shopping spree: new-house smell.

What exactly is new-house smell? Also known as new-construction smell, it’s essentially a combination of smells given off by the many materials that go into building a house—things like fresh paint, carpet, wood, and adhesives. If there’s any new furniture in the home, that could be contributing to the smell as well.

But is new-house smell unhealthy to breathe in, day after day? Here’s a closer look at what new-house smell is made of, and how to get rid of it, too.

What is new-house smell?

Before we dive deep into new-house smell, let’s take a step back—way back—and look at what causes anything to smell in the first place.

Bill Carroll Jr., an adjunct professor of chemistry at Indiana University, says all smells come from molecules in the air that your nose can detect. The molecules must evaporate to get into the air, and the more likely they are to evaporate, the more volatile they are and the easier they are to inhale and detect as odors.

“If you can smell it, it’s because of a molecule in the air,” Carroll says. “The fact that it’s in the air means that it is a volatile compound at least to some extent.”

As scary as “volatile” sounds, it doesn’t necessarily mean a substance is dangerous or explosive. Carroll says it simply means that something can easily evaporate into the atmosphere, thus releasing an odor. For example, he says metals aren’t very volatile, which is why you probably don’t smell much (hopefully) if you sniff your stainless-steel refrigerator. Other materials like paints, adhesives, and plastics, however, are more highly volatile.

Are VOCs dangerous?

While new-house smells aren’t necessarily dangerous, there is some concern about certain types of volatile organic compounds, or VOCs, that exist in some building materials (e.g., paint, carpet, and furniture). Some have been linked to health issues, including cancer and central nervous system damage in people (e.g., construction workers who don’t wear face masks) exposed to high quantities of such materials.

“When you talk about VOCs that raise health concerns, that goes more to a substance’s inherent toxicity or reactivity,” Carroll says. “It’s the difference between smelling a banana and smelling paint stripper, for example. They’re both volatile, but they have very different toxicities.”

“Regardless of odor, the ability of some of the VOCs emitted from any of [building] products and materials to cause health impacts or create other dangerous conditions varies greatly, depending on several factors,” according to the Environmental Protection Agency. “These factors may include the type and amount of VOCs emitted, the toxicity of the individual and combined VOCs, the ventilation rate in the space, the type and amount of other materials in the space, occupant level of exposure and length of time exposed, and the health of the exposed occupants.”

However, this is definitely not to say that a new-house smell will make you sick.

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Watch: Get Smoker’s Smell Out of Your House for Good—Here’s How

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The good news is that because of concerns raised over certain dangerous VOCs in the past 40 to 50 years, there’s a been a strong movement to reduce them. Carroll says that’s most apparent in regard to paint. While oil-based paints used to emit high levels of VOCs and the odor would linger for a long time, today’s paints contain virtually no VOCs and their odor dissipates more quickly.

In general, that means new houses today have much less of a pronounced smell than they did a years ago—and are less hazardous. For the overwhelming majority of the population, the odor is at worst a nuisance.

To reduce any potential indoor air–related health impacts from VOCs, the EPA recommends using low-emitting products and building materials and increasing ventilation. The agency also offers further information on VOCs and indoor air auality.

How to get rid of new-house smell

“If you like new-house smell, that’s OK,” Carroll says. “If you don’t, it’s important to remember that the solution is dilution.”

He says for an empty house, that means opening the windows to air things out, and usually in a matter of days that new-house smell will disappear. Another solution is to “bake” a new home. Since some VOCs evaporate more quickly at higher heats, this technique has a homeowner turn up the heat in the unoccupied house for a few days while running fans to push them out the windows. Running exhaust fans and using an air purifier may speed things up, too.

Carroll says what’s more concerning than new-house smell, however, is what you bring into your place on your own.

“The greatest source of VOCs is the stuff you bring into your house,” Carroll says. Items such as furniture, cleaners, waxes, and fragrances expose people to far more VOCs over the course of a lifetime.

Know this: If you’re moving into a new home and get a whiff of that telltale new-house smell, it will eventually wear off, even if you do nothing. Promise.

Source: realtor.com

The Pros and Cons of Building vs. Buying as a First-time Homeowner

As the seller’s market continues, many first-time homebuyers are deciding which route is best for them: buying an existing home or building a new one. While the right answer varies from person-to-person, there are several pros and cons for each option. As the housing inventory shortage continues, new construction has grown in popularity but the demand still outpaces the supply, so many buyers look to existing construction. Understanding what each option entails will help homebuyers make a better, more informed decision in their home buying journey.

building a homebuilding a home

Read: How New Constructions are Helping Ease the Housing Shortage

Buying an Existing Home

Existing homes are often referred to as resale homes. “Resales are properties that are previously owned and re-selling not new.”

How To Know If an Existing Home Is The Right Choice For You

Sonia Graham, Realtor with JPAR Maryland Living advises that “Existing homes are a great choice too  – you can tell if the bones are good; neighborhoods are established. Maybe you want something with good bones and a vintage feel that you can also update.”

Things To Consider With Existing Homes

Graham states in the Annapolis-Baltimore area that approximately 65% of recent sales are existing construction and that, “we are in a seller’s market here in Maryland. Homes are being priced really well, however, because of the lack of inventory, homes get sold at higher than listing.” This is true across the U.S. In September 2020, existing home sales increased by 9.4% from the previous month and 20.9% increase from last year for a total of 6.5 million homes.

existing home buying vs buildingexisting home buying vs building
  • Total housing inventory declined from the prior month and one year ago to 47 million, enough to last 2.7 months at the current sales pace. What this means for buyers: There are less homes to choose from.
  • Existing homes prices were up 14.8% from September 2019 and according to the National Association of Realtors “September’s national price increase marks 103 straight months of year-over-year gains.” What this means for buyers: You may pay more for less home depending on your budget.
  • In September 2020 properties remained on the market for 3 weeks – an all time low according to NAR. What this means for buyers: The market is fast paced and requires buyers to decide and act quickly to secure a home.
  • Eighteen-percent of September 2020 sales were purchased by cash buyers according to NAR’s data. What this means for buyers: Buyers must make strong, clean offers to compete against the large portion of cash buyers.
  • For homes that sold in August 2020, homeowners had just over 3 offers on their home according to NAR. What this means for buyers: Expect that you will have to compete and present your highest and best offer every time.

Buying A New Construction Home

Housing starts, or new construction, rose 8.1% from this time last year, according to National Association of Realtors’ Chief Economist, Lawrence Yun. Sonia Graham says that 37% the Annapolis-Baltimore home sales have been new construction. And there’s a reason the new construction has grown in popularity: it’s helping to ease the housing shortage.

construction buying vs buildingconstruction buying vs building

How To Know If New Construction Is The Right Choice For You

Sonia Graham states that with new construction “the biggest incentive is the closing help; using the builder’s lender generally keeps the cost lower for the builder and so they have more room to offer incentives.”

Read: Questions to Ask Before Buying Land to Build Your Dream Home

Read: When Should We Start Building Our Home? Pros and Cons of Building in the Spring

Things To Consider With New Construction

As Graham says, “everyone loves the idea of being the first to live in a home – nothing used by anyone before, everything sparkly and brand new…” However, it’s important to understand no home is perfect; existing or new. This is why Graham strongly suggests “using the home inspector your Realtor works with… red flags will be found in the home inspection.”

  • “Housing starts had hit 1.617 million in January and fell to 934,000 in May. The recovery hit a snag due to the shortage and rising cost of lumber, with the price of softwood lumber up 81% year-over-year as of September”, according to NAR’s latest data. What this means for buyers: As lumber prices increase, so will new home cost. The increase cost in lumber is ultimately transferred to the buyer.
  • Thirty-nine percent of buyers choose new construction to “avoid renovations or problems with plumbing or electricity.” What this means for buyers: There should be no looming large expenses like a roof or plumbing with new construction.
  • Closing costs are negotiable. Unlike with existing homes, builders tend to be more open to paying for some or all a buyer’s closing costs. This should be negotiated early-on and put into writing between the buyer and builder. What this means for the buyer: If the burden of closing costs AND a down payment are an issue, new construction could possibly ease that burden by helping with closing costs.
  • Builders provide warranties, but read the fine print! Builders will typically provide a one year builder’s warranty; however, they don’t cover everything. It’s advised that buyers request to see a copy of the warranty prior to purchasing the home. Buyers may also purchase additional home warranty options which cover more.

To decide which option is best, it’s important that as a buyer you work with an experienced and knowledgeable Realtor that is proficient in both areas. As Sonia Graham reminds, “Its truly a family by family choice and neither is “right or wrong” as a whole – just “right or wrong ” for the client and their family.” By working with a Realtor, buyers can feel comfortable and informed on which choice is best for them. To start your new or existing home search, download the Homes.com app on your smartphone or search via the web.


Jennifer is an accidental house flipper turned Realtor and real estate investor. She is the voice behind the blog, Bachelorette Pad Flip. Over five years, Jennifer paid off $70,000 in student loan debt through real estate investing. She’s passionate about the power of real estate. She’s also passionate about southern cooking, good architecture, and thrift store treasure hunting. She calls Northwest Arkansas home with her cat Smokey, but she has a deep love affair with South Florida.

Source: homes.com

2020 home sales hit highest level since 2006

Existing home sales rose in December, and total home sales in 2020 reached the highest level in 13 years, according to the National Association of Realtors.

A total of 5.64 million homes were sold in 2020, up 5.6% from 2019 and the most since before the Great Recession, according to Lawrence Yun, NAR’s chief economist. Sales also rose 0.7% from November and 22.2% year over year.

“What’s even better is that this momentum is likely to carry into the new year, with more buyers expected to enter the market,” said Yun.

Experts project low mortgage rates to continue driving home sales in 2021. Industry officials believe rates could hover around or below 3% for the foreseeable future.

“Early signals show that rates may begin to inch back up, but as long as COVID strains the economy, it’s unlikely mortgage rates will rise substantially,” said John Pataky, executive vice president at TIAA Bank.


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Plus, financial relief from President Joe Biden’s American Rescue Plan is expected to provide a boost for home sales.

“Expect economic conditions to improve with additional stimulus forthcoming and vaccine distribution already underway,” said Yun.

“NAR will work with the incoming Biden administration in pursuit of policies promoting housing affordability and accessibility,” said NAR President Charlie Oppler. “We were pleased with the homebuyer tax credit President Biden proposed as a candidate and we look forward to continuing our work with Congress and the White House. We will aim to find common ground, especially related to ways of boosting home supply and working toward solutions that will protect and support homeownership and America’s broader real estate industry.”

The median existing-home price for all housing types in December was $309,800 – up 12.9% from December of 2019 – as prices increased in every region. December’s national price increase marks 106 straight months of year-over-year gains, according to NAR officials.

Total housing inventory at the end of December totaled 1.07 million units, down 16.4% from November and down 23% from one year ago. 

Yun added that 70% of homes sold in December of 2020 were on the market for less than a month.

“To their credit, homebuilders and construction companies have increased efforts to build, with housing starts hitting an annual rate of near 1.7 million in December, with more focus on single-family homes,” Yun said. “However, it will take vigorous new home construction in 2021 and in 2022 to adequately furnish the market to properly meet the demand.”

Individual investors or second-home buyers purchased 14% of homes in December, identical to the share recorded in November 2020 and a small decline from 17% in December 2019, per officials.

According to Freddie Mac, the average commitment rate for a 30-year, conventional, fixed-rate mortgage decreased to 2.68% in December – down from 2.77% in November.

Here’s the regional breakdown of existing home sales in December:

  • Home sales in the Northeast rose 4.5%, recording an annual rate of 930,000. The median price in the Northeast was $362,100, up 19% from December 2019.
  • Home sales in the Midwest were unchanged, recording an annual rate of 1,590,000 in December – but up 26.2% from a year ago. The median price in the Midwest was $235,700, a 13.7% increase from December 2019.
  • Home sales in the South increased 1.1% to an annual rate of 2,860,000 in December. The median price in the South was $268,100, an 11.3% increase from a year ago.
  • Home sales in the West fell 1.4% from the month prior, recording an annual rate of 1,380,000 in December – but still a 17.9% increase from a year ago. The median price in the West was $467,900, up 14.2% from December 2019.

Source: housingwire.com

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Good Financial Cents, and author of the personal finance book Soldier of Finance. Jeff is an Iraqi combat veteran and served 9 years in the Army National Guard. His work is regularly featured in Forbes, Business Insider, Inc.com and Entrepreneur.