What to Expect From New Construction Post COVID-19

Industry Observer with LendingTree

Like much of the economy, new home construction has slowed significantly as the U.S. battles the coronavirus pandemic. 


New home sales fell more than 15% in March from the month before, and were down nearly 10% from the same month the year prior, according to the U.S. Census Bureau. New home starts were down more than 22% from February. 


It will likely take several more months to understand the full impact of COVID-19 on the housing industry. One thing seems certain: The new homebuying process will be irrevocably different.


Here are five ways new construction will change in a post-coronavirus world. 

New construction will be more expensive

With factories closed and supply chains faltering, building materials could soon become harder to come by — driving up prices on new construction. Already, a quarter of general contractors surveyed by the Associated General Contractors of America reported a lack of building materials and supplies as a source of delays.


Loans that cover the cost of building or renovations, known as construction loans, are also under pressure. The National Association of Home Builders (NAHB) is lobbying the federal government to allow banks to sell construction loans to Fannie Mae and Freddie Mac. Many lenders, especially community banks, are limited in the number of loans they can have on their books at one time. Helping them sell construction loans in a secondary market will free these lenders to approve more mortgages faster.


While the impacts haven’t yet been fully felt, housing affordability is already suffering. Job losses are reducing family incomes, while limited supply and slowing construction activity are keeping prices high. 

You could face delays

Building a new home is already a long, drawn-out process. In the new normal, this could take even longer. 


With many city and county offices closed, new home construction projects are facing significant delays in obtaining plan approvals and building permits. Cities like Miami-Dade halted inspections. While local governments are working on a more digital process, that changeover is slow, and permit review backlogs are growing in many areas. In an April survey from the National Association of Home Builders, 86% of respondents said COVID-19 had already affected the length of time it takes to get permits, and nearly as many said they’d had issues getting inspections completed.


There will also likely be delays on the builder end. The new home construction industry was already facing a lack of skilled workers, and the pandemic has only made that worse. And some states are limiting the number of people who can work at any one time. Pennsylvania, for example, is preventing more than four workers at a time from working on a new home construction job site. National homebuilder D.R. Horton is allowing only one trade category to work on a home at a time, slowing the build process. 


There may also be more work interruptions as homebuilders monitor employee health more vigorously. The federal Occupational Safety and Health Administration (OSHA) recommends that workers avoid contact with each other and stay home if they are sick.

You’ll have new health and safety concerns

Homebuilders across the country are changing how they do business to keep employees and customers safe and healthy. One big change: The era of open houses could be a thing of the past. 


Nearly 60% of homebuilders say they are offering private showings of model homes or will be soon, according to an NAHB survey. Almost half will use online closings, and a third will offer drive-through closings.


Lennar Homes, a national homebuilder, is opening its community welcome centers by appointment only and taking only one family at a time on a tour. It also created a digital new home orientation process and has moved some walk-throughs to FaceTime instead of in-person.


Instead of sending a staff member to a person’s home after move-in, Beazer Homes, another national homebuilder, is checking up on customers remotely.

The shape of homes may change

The homebuilding industry pays close attention to what consumers want in new homes, and the current pandemic could make consumer preferences shift. The National Association of Home Builders anticipates that the experience of being on lockdown could increase demand for specialty rooms, like home offices and exercise rooms.

Homebuilders are offering incentives

The news isn’t all doom and gloom for potential buyers of newly constructed homes.


Many homebuilders are offering incentives to help close deals during this housing slowdown. Some are advertising no-closing-cost deals or dangling $1,000 or $5,000 credits for people who sign contracts quickly. Others are allotting $10,000 or more toward outdoor amenities. 


With little supply on the market right now, however, not all homebuilders feel the need to offer new incentives, though they may change their method of marketing the ones they currently have. But as more homes come on the market, this might change — especially with 93% of homebuilders reporting in an NAHB survey that their customer traffic has diminished due to coronavirus.

Is an existing home a better choice?

Not necessarily. Though there are new challenges in the new home construction market, there are many other things to consider as you weigh buying a new home versus a pre-owned one.


Buying new construction gives you the chance to live in a home custom-built for your family, and maintenance costs will likely be lower for a period of time.


When you add those together, that could be enough to tip the scale, even in 2020.




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Richard Weeks
Dallas, TX
REALTOR®, Broker

Great information, thanks for sharing.  I hope you have a great day.

May 22, 2020 01:40 AM #3
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