American construction firms are amending their strategies and financial prospects as the consumer demand for residential property changes. It is hard to forecast at the moment whether the growing number of rescinded contracts and the market performance declining to the pre-pandemic level will become a stable trend.
The market of residential property is currently transforming because of higher interest rates and the probability of a recession. The whole country can feel the ripple effect but in some places it’s more manifested than in others. The West Coast and large cities that performed far above the national average during the pandemic are undergoing the most dramatic change.
Rick Beckwitt, CEO and President at Lennar Corporation (a Miami-based construction firm), had a telephone conversation with investors at the end of June and declared that Florida markets were among the best in the country that month. Beckwitt identified seven markets where his corporation had to lower the prices and offer more favorable financing options:
- Raleigh, North Carolina.
- Austin, Texas.
- Minnesota.
- Seattle, Washington.
- Los Angeles, Sacramento, and Central Valley, California.
Most managers of construction firms concur that June was the first month with a noticeable slowdown in the American real estate market. According to Redfin, about 60,000 residential property purchase contracts (14.9% of all contracts signed) were rescinded in the USA that month. Last June, this share was 11.2%.
Some construction executives declared that this trend is the buyers’ direct response to the interest rate that was raised at a May meeting of the Federal Reserve System. Mortgage rates experienced a sharp surge at approximately the same time.