Philly-area home builders had a strong 2023. They’re confident about 2024.

In a normal year, the newly built single-family home business ebbs and flows. But last year, the Camden County-based home builder Bruce Paparone Communities Inc. had a pretty consistent sales streak throughout the year and ended 2023 by hitting its sales goal of 108 signed contracts.

Because of high buyer demand, “2023 was a big sales year for us and for South Jersey,” said Sam Paparone, vice president of operations at the company, which builds townhouses and detached single-family homes for all ages and 55+ communities. “Going into 2024, we’re definitely seeing it staying elevated.”

Because of many years of underbuilding and homeowners with low mortgage rates deciding not to sell, not enough properties are available for sale to meet demand from buyers. Single-family home builders looking to fill the need are optimistic for 2024.

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“Generally, sentiment for the builders is that 2023 was a good year, and it’s still going to continue into this year,” said Richard S. Van Osten, executive vice president of the Builders League of South Jersey. “From the nationals down to the smaller builders, everyone seems to have a positive attitude about this year.”

That’s thanks to lower mortgage interest rates, which are “a promising sign” for new home sales in 2024, because they help buyers afford homes, said Danushka Nanayakkara-Skillington, assistant vice president for forecasting and analysis at the National Association of Home Builders.

Builders also aren’t dealing with the supply issues that plagued them during the pandemic, and inflation has been easing.

Nationally, builders’ confidence in the new single-family home market rose in January for the second month, and builders in the northeastern United States are most confident, according to the association.

But “long-term issues such as a shortage of buildable lots, a lack of skilled labor, and excessive regulations will continue to pose challenges for builders,” Nanayakkara-Skillington said in a statement.

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Russo Corp., which builds most of its homes in the Gloucester County region, closed 17 sales in 2023. It was a good year for the builder, which mainly offers homes ranging from $500,000 to $1.5 million and has lately been seeing a lot of millennial buyers looking to move into bigger homes.

This year, the builder has 26 homes under construction and is getting ready to start three more.

“We’re going to double what we did last year,” said president Nate Russo Sr.

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Peter Rotelle, owner of the Chester County-based Rotelle Development Co., also expects big things this year. Last year “was really strong,” he said, “which is kind of a weird dynamic” since mortgage rates last year rose above 7%.

With homeowners staying put because they don’t want to give up their lower rates, “new construction is one of the only options out there,” he said.

Now that mortgage rates are trending lower, the new-construction market stands to benefit from increased affordability. But so does new-home builders’ biggest competition: the existing-homes market. Local builders said they see enough demand to go around.

Demand had stalled in 2022 as buyers balked at higher rates, Paparone said, but demand surged once buyers got more used to the idea that rates wouldn’t return to pandemic lows.

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But just as in the resale market, unaffordability is keeping some potential buyers of new homes from entering the market.

“Overall, there’s a concern from everybody about the cost of new homes,” Van Osten said. “Townhouses for a lot of people were their starter homes. And now in some cases they’re at a half-million [dollars], which seems kind of crazy.” He said buyer demand, the pandemic, and government regulations have pushed up costs.

Lumber costs have come down from pandemic highs, but they’re still elevated compared to before the pandemic. And prices for materials such as windows, siding, and PVC pipe are up, Paparone said.

So “any relief we saw on the lumber side just got eaten up and surpassed by the other increases,” he said.

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Rotelle said he would like to cut home prices to attract more buyers, but with costs up, he’s just trying to keep them stable and increase them “only when we have to.”

Russo predicts that in the years ahead, rising prices will put detached single-family homes out of reach for more people, driving them to townhouses and condos. His company is looking to do a condo project in the near future, he said.

Builders are hoping that since home prices are up across the board, buyers will choose new construction instead of paying high prices for homes that might not be exactly what they want. Paparone said the buyers he sees are frustrated with the resale market “because they’re just not finding what they want, what they’re looking for, or everything they’re seeing needs work.”