Building Tomorrow: The New Construction Nest Egg

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Published Date 12/9/2024

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

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