If it seems like new construction signs are appearing all over the place, that’s because they are. Builders have been working nonstop. This has some folks asking: Are we building too much, like what happened before the 2008 housing crash?

Despite what you might hear in the news, there’s really no need to worry. In fact, data shows that builders aren’t rushing to finish projects—they’re actually beginning to slow down a bit.

Builders Are Pulling Back, Not Piling On

Building permits, which are the first step in getting approval to start new home construction, are a key sign of where the housing market is headed. Right now, the number of these permits is going down instead of going up. That’s a big deal because it points to a slowdown in new home construction in the near future.

In the years leading up to the 2008 housing crash, builders increased their production of single-family homes a lot (you can see this with the red arrow on the graph). The problem was, they ended up building way more homes than the market needed. Because of that oversupply, home prices dropped. That's what a lot of people remember and worry might happen again.

Construction has been gaining momentum since around 2012, but this time, things are different—we’re avoiding the mistakes made before. In fact, the most recent data shows that builders are currently starting work on fewer homes (as indicated by the green arrow in the graph below).

New information from the National Association of Home Builders (NAHB) shows that single-family building permits have been dropping for eight months in a row.

The Slowdown Isn’t Random, It’s Intentional

Builders are closely monitoring the current economic situation and buyer interest, making adjustments as they go. They’re slowing down construction to prevent ending up with too many homes that don’t sell. As Ali Wolf, Chief Economist at Zonda, points out:

““. . . builders are still working through their backlog of inventory but are more cautious with new starts.”
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— Ali Wolf, Chief Economist at Zonda

Before the housing crash, builders were way too confident and kept constructing more homes even though fewer people wanted to buy. Now, builders are much more cautious. They’re paying close attention to what buyers actually want and are making changes early to keep everything balanced.

The Regional Picture Tells the Same Story

Inventory levels will differ a lot depending on your specific location, but if you step back and check the regional data, you'll see a similar pattern showing up pretty much everywhere (see graph below).

The NAHB says that single-family home permits are dropping almost everywhere across the country. Only one region saw a tiny increase, but it’s so slight that it’s basically unchanged.

Why This Isn’t 2008 All Over Again

Before the last crash, builders kept putting up new homes even after the demand dropped. This time around, they’re slowing their pace much sooner, which is definitely a positive sign.

The market definitely needs more homes after so many years of underbuilding. But builders are being careful not to build too many too fast. They’re choosing to build at a steady, thoughtful pace instead of trying to catch up all at once.

You’re noticing more new homes on the market, but that doesn’t mean there’s an oversupply across the country. It just means buyers now have more choices, and builders are carefully managing how many homes they’re putting up. They’re not going to overwhelm the market, which is actually great news for the housing market as a whole.

Bottom Line

Seeing more new homes on the market doesn’t mean builders are going all out. In fact, with building permits dropping for eight months in a row, it’s clear this is a balanced, steady recovery—not a wild boom.

Curious about the latest from builders in our area? Let’s get in touch and I can fill you in.