As home builders ramp up production, more supply will reach the market. In November, single-family home construction rose 18% from the prior month and was up a hefty 42% from one year ago. Home builders’ sales have been up this year despite high mortgage rates due to the offer of incentives on buying down interest rates and the long-held business model of offering co-op commission to buyer agents. That’s the free market way of doing business in a very competitive industry.

Even more home building will be needed with the housing shortage persisting in most markets. Home price appreciation can only moderate from drastically improved supply. Another 30% rise in home construction can easily be absorbed in the marketplace, especially in light of recent weeks’ plunge in mortgage rates.

Line graph: Single-family Housing Starts
Line graph: Single-family Housing Starts
Line graph: Existing-Home Inventory and New Home Inventory
Bar graph: 10-year Treasury yield drops