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Builders Planning More Starts This Year, Zonda's Chief Economist Says

Four out of five builders polled by Zonda plan to build more homes this year, with 51% of all those surveyed saying they’ll build at least 10% more, Zonda’s chief economist reported March 12.

Single-family starts will rise about 3.5% in 2024 to 980,000 homes, Ali Wolf predicted, while Multifamily construction will cool by 26% to 350,000 units. That said, lumberyard executives also must keep in mind that construction activity varies dramatically from market to market. And all markets need to pay attention to how much housing sizes are shrinking, as that implies less lumber will be needed per home package.

Ali Wolf, Zonda
Ali Wolf, Zonda

Wolf, speaking near Tucson to the North American Wholesale Lumber Association, said the healthy labor market and the cooling inflation rate are “data points moving in the right direction.” But she still gives a 60% probability to a recession in the U.S.

Affordability provides many colors to the overall picture, starting with mortgage rates. Wolf noted that many of the biggest builders are providing prospects $20,000 to $50,000 worth of incentives to buy a new home, often by reducing the effective loan rate. Those buydowns, combined with a 40% decline in existing home listings today compared with 2019, has resulted in new homes’ share of inventory doubling to about 30% of all homes available from its norm of 15%.

Affordability also shows up in builders’ decision to construct smaller homes. The average square footage of a new home has declined from 2,650 in 2018 to 2,350 in 2024. But there are dramatic differences by market with big declines in Seattle and Washington, DC, and bigger homes in Phoenix.

Nevertheless, renting on average today has a 20% cost advantage over what one would need to pay for a new-home mortgage with a 20% down payment, Wolf said. No wonder that, when they look for an existing home, 80% of potential buyers are willing to take a place that needs some repairs.

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