CHM Blog

Building Tomorrow: The New Construction Nest Egg

The chicken or the egg – which came first? When it comes to housing, there is no doubt about how we create neighborhoods as well as opportunities to own a home. Lately it has been America’s home builders who are working to fix America’s critical housing shortage. And while the number of new homes is expected to top 1.1 million in 2025, expect them to be built slightly smaller, according to Realtor.com’s Teiruma Gonzalez.

“Homebuyers can expect them to be more affordable, too,” she says, citing Realtor's 2025 Housing Forecast. “This is especially good news for first-time homebuyers, who might find new homes easier to access in areas that are growing.”

She goes on to report how, in 2025, new-home sales and single-family housing starts are expected to improve compared with other types of homes. Builders plan to construct about 1.1 million homes — a 13.8% increase from 2024. They’re also working to make homes more affordable, especially for first-time buyers. How? By focusing on smaller homes, which are not in plentiful supply. “The number of new homes sold for less than $300,000 rose from 14% in September 2023 to 17% in September 2024. This trend is expected to continue in 2025, giving homebuyers more affordable options,” says Gonzalez.

Even cooler? Builders are now using new technologies, like modular and 3D-printed homes, to lower costs and speed up construction. But be warned: While on the face of it, new-home construction looks promising, there are some uncertainties due to the incoming Trump administration and potential policy shifts.

Even though the president-elect is vowing to reduce building regulations, including making more federal land available for development, his plans may also jettison a number of hardworking tradespeople who build these new houses as well as raise tariffs. If both of these policies go into effect, the costs of labor and materials could slow construction and push home prices even higher. While a thriving housing market relies on the balance of policies that enhance land availability and the lessening of regulations to foster growth in construction, restrictive policies such as stricter immigration rules or new tariffs could lead to increased costs for labor and materials.

These cost increases are usually passed on to the end consumer, raising home prices and making affordability an even greater challenge. Buyers are wise to monitor new markets where homes are being built to take advantage of opportunities in 2025, however, as there is plenty of good news on the horizon. The recovery of the housing market will depend largely on mortgage rates, buyer attitudes, and the overall economy, in addition to labor costs, building materials costs, and relaxed regulations.

Gonzalez says inventory is expected to increase as competition between buyers and sellers becomes more even. At that point, existing-home sales may gradually recover, creating chances for both sides. “The market’s complete recovery will ultimately depend on how quickly these changes happen and whether potential buyers feel confident enough to participate in the current financial landscape,” she says.

Realtor, TBWS

How Rates Move:

Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage-Backed Securities (MBS) which are traded in real time, all day in the bond market. This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events. When MBS pricing goes up, mortgage rates or pricing generally goes down. When they fall, mortgage pricing goes up. Tracking these securities real-time is critical. For more information about the rate market, contact me directly. I'm among few mortgage professionals who have access to live trading screens during market hours.

Rates Currently Trending: Higher

Mortgage rates are under mild pressure today. The MBS market improved by +26 bps last week. This may have been enough to decrease mortgage rates or fees. The market experienced moderate volatility last week.

This Week's Rate Forecast: Neutral

Three Things: These are the three areas that have the greatest ability to impact rates this week: 1) Inflation, 2) Central Banks and 3) Geopolitical.

1) Inflation: We will get several inflation related data sets this week with CPI, PPI, Import Prices and Unit Labor Costs. The bond market will give the most weight to CPI with YOY Core CPI expected to rise versus its previous reading.

2) Central Banks: We hear from several Central Banks this week. The Bank of Canada is expected to cut 50 BPS on Wednesday and the European Central Bank is also expected to cut although there is much debate on 25 BPS versus 50 BPS at this meeting.

3) Geopolitical: We lost two governments last week with France and Syria with Syria still very much in the headlines. Geopolitical winds swirling around Russia, Ukraine and the Middle East will be very key.

Treasury Auction: Here is this week's Treasury auction schedule.

12/10 3 year note.

12/11 10 year note.

12/12 30 year bond.

This Week's Potential Volatility: High

This morning markets are under some mild pressure with a narrow trading channel. Volatility has started low but may increase later in the week on inflation news.

Bottom Line:

If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.

Richard Sardella has been actively managing and providing services in the mortgage industry for over 30 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.