Total housing inventory for existing homes has decreased year-over-year for 14 straight months. The situation isn’t much better for the new homes market.
According to this morning’s report by the U.S. Commerce Department on August housing starts, building last month was 5.8 percent below July and 0.9 percent lower than a year ago.
Difficulties securing financing, permit delays, higher construction, regulatory and labor costs, and challenges finding skilled workers continue to hamper more meaningful construction gains. This has led to a pace of building that is far below current job creation in most of the country.
Need proof? Take a look at this new NAR Research report on the markets with the greatest need for more single-family housing starts.
Historically, the historical average ratio for the annual change in total jobs to single-family permits is 1.6. The study’s findings show that 80 percent of measured markets (171 metro areas) have a ratio above 1.6, indicating a supply shortage.
The next time you hear the sounds of drills and hammers in your neighborhood, know that it’s for a good cause. Increased homebuilding and a gradual shift from apartments to single-family homes is the main prescription to keeping price growth in check and preserving affordability for most prospective buyers.
Check out how how many single-family housing starts are likely needed in your metro area to get back to the historical average in relation to job gains.
Copyright NATIONAL ASSOCIATION OF REALTORS®. Reprinted with permission.