Strong Home Prices to Provide Incentive to Home Builders to Maintain Production

Consumers are increasingly getting used to higher prices for a number of products, such as toilet paper and meat, due to supply shortages. This recent Wall Street Journal article indicates that shoppers for a pricier product – a home – will also be confronted with rising prices for the same reason: a lack of homes on the market that are available to purchase.

This shortage of homes presents an opportunity to the nation’s homebuilders, many of whom have been buffeted by shutdowns (in some states) and worker safety requirements – such as social distancing and the need to more frequently sterilize equipment – that have added to the time and expense of homebuilding. While new homebuilding is expected to decline in 2020 – especially in the second quarter of the year – it is anticipated that this market will rebound in 2021 and beyond. Indeed, if home prices remain high, builders may ramp up production to maximize profitability – an especially important consideration for firms that saw sales declines in 2020.

For detailed information about the effects of the COVID-19 pandemic, see The Freedonia Group’s:

• COVID-19 Market Impact Analysis report
• growing catalog of industry-specific COVID-19 Economic Impact Reports
• macroeconomic indicator updates in COVID-19 US Economic Impact March 2020 Update and COVID-19 Global Economic Impact March 2020 Update
• coronavirus-related analysis incorporated into all reports published in April and beyond
• free macroeconomic trends talk with The Freedonia Group’s chief economist

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