According to Commerce Department data released this week, the number of housing starts rose 6.8% last month from January. But homebuilders say rising mortgage rates, in addition to rising building material costs, have clouded their outlook for future sales.
So what does this mean for sales of existing homes that have already been lived in, especially in a tight market?
Raleigh, North Carolina is a research powerhouse. Many people go there for jobs in technology and medicine. But if they want a newly built home, real estate broker Sheryl Merritt said those homes aren’t always ready.
“So a lot of people looking, you know, some of them are kind of ready right now. So that’s where existing homes are most popular,” she said.
Existing homes are selling for more than 2% above their listing price on average, she said.
Now, with mortgage interest rates rising, “we expect more and more buyers to be squeezed out of the market,” said Taylor Marr, deputy chief economist at Redfin. “And as a result, we could see a decline in existing home sales throughout this year.”
In Raleigh, Merritt said the city is considering creative solutions. It recently approved the construction of tiny homes, which it defines as homes under 600 square feet.
“Where you can put a house or a small house on a lot that already has a single-family house on it.”
Merritt has heard of owners with large yards considering doing so. So an existing house could give birth to a new house… sort of.