Surprise! Residential is On the Road to Recovery
When the COVID-19 pandemic occurred, virtually all businesses were disrupted, including residential construction. But if recent news is any indication, the sector might be making a modest comeback.
According to CNBC, new homes sales increased by nearly 1 percent in April, defying expectations that they would fall by 22 percent. But the good news doesn’t end there — builders have seen stronger demand as well.
“The April data for new home sales show the potential for housing to lead any recovery for the overall economy,” National Association of Home Builders Chairman Dean Mon told CNBC. “Because the housing industry entered this downturn underbuilt, there exists considerable, pent-up housing demand on the sidelines.”
In addition, for more than a month, mortgage applications to purchase homes have increased. “The coronavirus pandemic has generated any number of nasty surprises over the past few months, but the unexpected strength in April new homes sales may be the first pleasant surprise yet — and the clearest indicator so far that housing, so unlike the last time around, will be a source of relative strength during this downturn,” Zillow Economist Matthew Speakman told CNBC.
But a reason for this upswing may be related to the virus itself. George Ratiu, a senior economist for Realtor.com, told AP News that the shelter-in-place orders could have encouraged people to look for homes that met their needs after the COVID-19 outbreak, such as additional space and updated kitchens.
“As remote work policies are being extended into 2021 by a growing number of companies, and likely to become permanent in some cases, demand for home offices is projected to grow,” he said. “If homebuilders can respond to these shifting preferences, sales of new homes may see a swifter rebound in the months ahead.”