As the number of homes for sale in the U.S. keeps hitting new record lows, lenders and builders are teaming up to put more affordable inventory on the market.
AAFMAA Mortgage Services a wholly-owned subsidiary of the American Armed Forces Mutual Aid Association, is collaborating with the National Association of Independent Builders and Real Estate Services to form the Military Urban Development Initiative, a program designed to encourage new home construction. While aimed primarily at military families, the program is open to anyone.
"There's a big gap in terms of median income housing opportunity, only because rates have come down so much," said Paul Imura, a founder of NAIBRS and principal architect of the MUD program. "Demand is up, and there's a limited supply."
MUD brings together various groups, including AMS, to create new residential construction focused on that median income segment, said Imura, who is the executive chairman of Proposed Properties, a real estate marketing technology company.
AMS' overall goal in joining the partnership is to foster greater
"We find that there is a tremendous amount of people that are changing their duty stations coming up that can't afford the $400,000, $500,000 or $600,000 houses that are currently in the market," said Anthony Powell, AMS executive vice president. "Making a more affordable product for them, with a beneficial financing program that we're going to offer will greatly increase their financial stability."
A program like MUD can put "a sizable dent" into the shortage, said Imura, who explained that the program can work in standalone lots between existing properties or with available subdivisions.
The program will use Proposed Properties’ virtual land staging technology to take a lot and, based on its setbacks and requirements, pair it with one of over 20,000 home designs currently in its inventory, said its CEO Jim Pesavento.
"That inventory keeps growing because builders have the ability to upload their plans onto our platform," Pesavento said. "So we can market their plans as well, and that allows the real estate professional to market a land-home package together."
The virtual land staging "will allow our servicemembers to actually look at a home, secure financing and the home will be ready when they transfer duty stations," Powell added.
BuildZoom, which offers a platform that allows consumers to interact with contractors, is also a part of the MUD partnership. In addition to providing access to the platform, the company will provide up to $5,000 worth of upgrades for any military home buyer.
"The majority of home buyers are interested in new construction, but very few of them actually build," Pesavento said. "I think part of that is education — they don't know how long it's going to take, they don't understand the soft costs, and they don't understand the timing."
The MUD program aims to boost the number of homebuyers that are building homes by helping them to understand all the pieces of the process.
The supply is ramping up to meet the unprecedented demand for homes, according to the latest BuildFax report. New single-family construction authorizations were up in February by 2.57% compared with January and 9.08% on a year-over-year basis, the report found.
Builders who have homes ready to sell "are crushing it," said Ali Wolf, chief economist for Zonda, during the recent Urban Land Institute Housing Opportunity Conference. "They're selling as quickly as they want to."
But 50% of builders are capping their sales, while another 20% are pausing on taking contracts at all or are only going to sell at a certain stage of production, Wolf said.
Meanwhile, market indicators offer a telltale sign that inventory might not be creeping up anytime soon: Existing home maintenance was up by 7.46% in February over the same month last year, BuildFax said. Over the same time frame, remodel volume — a subset of maintenance that includes renovations, additions and alterations — was up 6.73%.
"As we approached one year since the onset of the COVID-19 pandemic, we saw some clear trends emerging related to homeowner behaviors that may be here to stay," BuildFax Managing Director Jonathan Kanarek said in the report.
"As a whole, investment in the existing housing stock has seen remarkable growth, as Americans continue to spend time at home and prioritize home improvements, rather than re-enter the competitive housing market," he said.
