At Home in Berks February 2017 - 25

construction - 60 days or less before they can close - before
putting them up for sale, she said.
"In most markets, the resale inventory is low - below equilibrium and in some markets critically low," Kahn said. "In
some cases, this is preventing people from listing their homes
because they're worried they won't be able to resell [it]." That
should have builders optimistic for new construction demand.
While low resale inventory will drive buyers in the newhome market, Kahn said homebuilders know that supply
can't meet demand overnight. "It's a slow process to ramp up,
to open new communities, to get the homes built, [to see]
growth in single-family permits," she said.

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Growth in new construction will likely spill over into the
existing-home market, leading to an increase in the rate of
listings. Would-be homeowners have been reluctant to sell,
fearing they'll be unable to find a trade-up property in time
and at a price they can afford. "They want to wait until some
combination of higher home prices and the better job market
is in effect," Carbacho-Burgos said, benefiting still from higher prices but not shut out of a new home.
"It's a slow process to ramp up, to open new
communities, to get the homes built, [to see] growth
in single-family permits."
Jody Kahn
Senior vice president, John Burns
Real Estate Consulting
Single-family housing starts fell by a modest 4.1% from
October to November but were up 5.3% year over year at an
annual rate of 863,000, compared to the plus-1 million annual
single-family starts rates recorded before the housing crash.
Single-family permits were up slightly (0.5%) from October
and 5.9% from November 2015.
But headwinds like a stringent regulatory environment
and a continuing labor shortage could blunt the impact of a
surge in new construction activity. "There continue to be these
bottlenecks, and that has been more pronounced now than it
has been in history," Kahn said. "Our outlook is that the real
estate inventory is going to continue to remain pretty low and
continue to drive some buyers into the new home market."
Markets like those in Ohio and New Mexico, where
construction activity is still at or near bottom, should see the
largest percentage increases in new single-family construction
over the next two to three years, according to Carbacho-Burgos. However, regions seeing the largest absolute increase in
construction - particularly in the Sun Belt states - have
characteristics like strong job growth spurring demand for
new construction.

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Danielle Hale, director of housing statistics at the National
Association of Realtors, explained that tight inventory conditions persist in the West, while metros like Nashville, TN,
and Denver continue to experience similar conditions, pushing prices up. She expects inventory to return to the market
nationally in 2017, and with it slowing price appreciation
- 4.2% for 2017, below 2016 expectations but still "on the
slightly higher side of normal."

Mortgage rate increases could keep
millennials out of the market
Debt-burdened and rent poor, many millennials continue
to stay out of the homebuying market. The steady home-price
increases over the past few years and, more recently, interest
rates increases, haven't inspired confidence in their return. Still,
builders know this price-sensitive group is ready and waiting
when inventory conditions loosen and housing costs moderate.
"There is that sense that there's a wave of buyer activity coming, and it's a pretty big number of households," Kahn said,
referring to the pent-up demand among young, would-be
homebuyers. "There's this feeling that here's a less-tapped segment that's going to be growing, and we need to get ourselves
in the mainstream of that activity."
Continued on Page 26.

DECEMBER 2016 AT HOME IN BERKs

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