A drop in pending home sales correlates to the decline in single-family housing starts, according to … [+]
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After almost two years of increasing demand, housing starts are poised to decline in coming months. This is among factoids divulged in newly released housing industry data, including LegalShield Economic Stress Index and Magnetic Collective/Century 21 findings regarding the pandemic’s effects on the real estate market.
The dichotomy of elevated demand and moribund sales is expected to continue in coming months, data indicates. Late last year, the LegalShield Housing Sales Index dropped to its lowest mark since the summer of 2020, reflecting low inventories and high prices. The combination of elevated prices, low inventories and rising mortgage rates should reduce housing sales. That said, though, sustained demand — especially among the Millennial cohort — should keep them above historical benchmarks.
The LegalShield Housing Construction Index reports housing starts grew 12% in October, staying 8% higher vis-à-vis the same time in 2020. Despite builders battling steep material costs, skilled labor shortages and supply chain woes, construction activity continues healthy, and will likely remain so for the foreseeable future.
“There is a very interesting angle . . . in that housing starts recently rose due to multifamily properties and not because people are building single-family homes,” said Jeff Bell, LegalShield CEO.
“Homeowners are rethinking whether they should buy or build now or rent during these economic times, which is why we’re seeing rental construction increasing while single-family home construction decreases. Additional enforcement of our belief is the recently announced drop in pending home sales. This was a ‘shock’ to the market, but our data has been seeing this since October. A drop in pending home sales correlates to the drop in single-family housing starts and an increase in multifamily construction.”
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Definition of home
Meantime, the definition of home has morphed considerably during the course of the pandemic. That was the finding of global data gathered by Century 21 Real Estate, which concluded that as countries followed the peaks and restrictions of their own unique Covid experiences, there was no one size fits all among home buyers.
Some of the longest lockdown and restriction periods were seen in the U.S., Spain and France. In Spain, 43% of buyers reported the influence of Covid is impacting them the most in their desire to buy a new home, while in France 58% reported the pandemic will have a lasting impact on what they want in their homes.
In Japan, which witnessed more of a slowdown than a lockdown in the early pandemic period, 48% of future buyers reported Covid has been a factor in their desire to purchase a new home.
Covid’s influence on aspects of the home-buying process in the U.S. has been most evident for those respondents with children and those remotely working from home. In Australia, which was impacted less by Covid than many other nations, the pandemic had little influence at all on home buyers.
Staying close
Considerable chatter was heard about people moving out of big cities and cross country to wider open spaces during the pandemic’s most difficult periods. It turns out those reports appear to be overblown, if the Century 21 data is any indication. Across all markets, most of those who moved said they moved within 20 miles of their current home. For instance, only 20% of U.S. and France buyers moved 50 or more miles or kilometers away, and in Spain and Japan, fewer than 15% moved that far away.
It’s true urban flight is taking place globally, but it is not likely to be an enduring movement. By a large margin, future buyers in all countries surveyed are more likely to remain in urban areas. The percentages remaining in urban areas range from 82% of future buyers in the U.S., to 62% in Australia, and 59% in France.