How Lower Housing Starts Will Affect Home Prices & Supply

Performance Property Real Estate Question

Q: Gerald, you said that home building has slowed recently. How will that affect home prices and housing availability? Stan, Caldwell, NJ

A:  Housing starts fell almost 10% recently as higher construction costs continue to disincentivize builders from initiating new projects.  Less home construction results in lower home inventory.  Home foreclosure filings have increased recently, (higher home foreclosure filings normally increases home supply), but not enough to offset a pullback in home construction.  Higher mortgage rates have further reduced home affordability.  Nevertheless, I don’t expect NJ home prices in most local real estate markets to fall anytime soon despite threats of recession and potentially higher mortgage interest rates.  I also expect housing inventory to continue to rise but at a slower pace.  Thanks for your question, Gail.
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