- 9M single-family homes built from 2012-2019 don’t come close to 9.8M new household formations
- According to com, nearly 4M new homes are needed to balance supply and demand
- At average pace of construction, it would take 4-5 years for builders to recreate a balanced supply and demand market
In a recent study done by realtor.com, inventory in today’s housing market is deficient by nearly 4M homes. “Simply put, new home starts are not keeping pace with demand,” said Javier Vivas, realtor.com’s director of economic research.
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Despite the higher number of new homes built by the end of 2019, supply was short. Do the math…from 2012 to 2019, 5.9M single-family homes were built while some 9.8M new households formed, according to realtor.com.
This supply shortfall did not begin yesterday. Since 2001, 17.6M new single-family homes were built while some 20.2M new households formed. Builders put up 1.7M new single-family homes during the height of the construction boom in 2005, according to the US Census Bureau, and then the housing crash happened in 2007-08. By the time 2011 rolled around, there were ONLY 430 housing starts. Compounding this already exaggerated housing shortage, investors bought some 5M homes and turned them into rentals during and after the housing crisis to further lower the for-sale inventory.
True, homebuilders built 880,000 new single-family homes in 2019 but, according to Vivas, these newly built single-family homes are “…still not enough. The current inventory crisis and the need for some 3.8M more single-family homes means a nearly insatiable appetite for potential buyers, especially in the lower end of the market.”
The “move-up” section of the housing market is also hurting from lack of supply due to the ever-increasing desire of Baby Boomers to “age in place” and not list their homes on the for-sale market.
The bottom line for this out of whack housing supply and demand problem, according to ˆrealtor.com’s Vivas, “Large populations of renters and qualified potential buyers with strong incomes are waiting in the wings…” for homebuilders to build single-family homes, especially in the entry-level sector of the housing market.
Thanks to CNBC’s Diana Olick and HousingWire’s Julia Falcon for source data.