Homebuilders Who Cater To First-Time Buyers Have Strongest Standing
The market is improving for home construction as home builders are geared towards more first-time home buyers. This is all thanks to the increasing demand and lower supply.
According to Yahoo Finance, homebuilders are seeing sunnier days after a months-long downturn, with homebuilder confidence in May hitting the highest level in 10 months. Builders can thank increasing demand and lower supply.
Citing “a very interesting dynamic in the market,” Lovallo noted the low number of homes for sale right now — averaging only 2.8 months of existing inventory. First-time buyers are an increasing share of the market, but they are encountering a supply dominated by old and costly homes, making newer homes an even more attractive option.’
While demand has certainly slowed, the demand that is out there is all being channeled toward these public homebuilders that, oh by the way, can offer financing,” Lovallo said. “So no one is paying 7% out there” – John Lovallo, US homebuilders and building products equity research analyst at UBS.
The stiff supply is what’s keeping home prices steady, too, he said.
“On the existing home side… there’s just not much out there,” Lovallo said. “So I think buyers that are looking for a home at this point are probably more inclined today than at any point in history to have to focus on a new home.”
According to the National Association of Home Builders, new home sales increased by over 4% in April. Beyond looking for new homes, many first-time buyers are at the prime age of homebuying, which Lovallo estimated was between 30 and 35 years old. Buyers at this age are anxious to move into homes after marrying or having children, making them more flexible about the finer details of the home itself.
