Affordability is attracting people to sunnier climes — and that's helping to heat up those regions' economies.
The number of new homes sold was up for the third month in February, according to the Commerce Department. Nationally, sales were up just over 1% from January. But that number hides some huge regional differences between the Northeast and the West and South.
Sales were up in the West — and especially in the South — because that’s where most new homes are being built.
“The fastest-growing cities nationwide are located in the South and West, so builders are responding to that demand,” said Odeta Kushi, deputy chief economist at First American Financial Corp.
It’s easier for builders to meet that demand in the South, in particular, because she said the region is relatively relaxed when it comes to regulations.
“Use regulations, density regulations,” Kushi said. “It’s easier to build from a regulatory perspective — versus, like, a Northeast, where it tends to be one of the most restrictively regulated regions.”
But a bigger issue in the Northeast is that homes there have been getting less and less affordable, whether they’re new or existing.
“Like, would you buy the house you have today at today’s price, at today’s rate?” asked Seth Williams, founder of Reference Real Estate, which operates in the Boston area. “My personal mortgage [would] be probably an extra $3,000 a month, based off the cost and the interest,” Williams said. “And I can tell you straight up, I wouldn’t be buying that house.”
As a result, Williams said a lot of builders there are worried people can’t afford new homes.
“We can only build during the spring, summer and fall months, which was when we saw the big uptick last year in mortgage rates,” he said. “So as people were about to maybe put shovels in the ground last spring, maybe they just didn’t dig.”
Low home prices have been attracting people to the South and the interior West, and that’s heating up those regions’ economies, according to Charlie Dougherty, senior economist at Wells Fargo.
“Because those regions also have seen stronger employment growth, stronger income growth, and that’s what’s fueling a lot of the positive economic growth in those regions,” he said.
That’s because when people buy new homes, they end up spending a lot of money in the local economy too.
