US is short nearly 4M new homes: report

Demand has far outpaced supply, with Realtor.com predicting existing home sales will drop and prices will rise

TRD NATIONAL /
Jan.January 21, 2020 04:54 PM
The U.S. is short 3.8 million new homes

The U.S. is short 3.8 million new homes

The housing shortage in the U.S. is deepening despite strong demand, and a new report found that builders must construct nearly four million new homes to catch up.

Almost 9.8 million households were formed between 2012 and 2019, but just 5.9 million new single-family homes were constructed during that period, according to listings website Realtor.com.

The report found it could take four to five years to fill the void of 3.8 million homes. That estimate comes even as single-family home construction starts per 1,000 households rose to 7.3 last year from 4.6 in 2012, according to Realtor.com. The eight-year average is 6.2 starts per 1,000 households, which is under the two-decade average.

“We still have a relative lack of supply,” said Mike Fratantoni, chief economist at the Mortgage Bankers Association. “Building has just not kept up with demand for the past several years.”

Because of this deficit, the listings platform predicts existing home sales will drop 1.8 percent this year. And the group expects the median price growth of those existing homes to rise a tepid 0.8 percent.

The demand is there to build more houses. Baby boomers are not leaving their homes and millennials are increasingly starting families, said Morris Davis, real estate professor and academic director of the Rutgers Center for Real Estate in Newark.

But demand for new housing is most pronounced in and around the gateway cities, where there is ample employment, Davis said.

“I do believe places like California and, to a lesser degree New York need an injection of housing to keep up with the demand of people” moving to those areas, he said.

While the country may need to add almost 4 million homes to its inventory, other estimates have found that the need for new homes in California alone could be nearly just as much: The state needs to build between 1.8 million and 3.5 million new homes by 2025 to help tackle homelessness and soaring housing prices.

The nationwide housing shortage is nothing new.

Since 2001 the U.S. has constructed 17.6 million new single-family homes, a figure that has fallen short of the 20.2 million households that have since been created. That translates to a gulf of 2.6 million homes, according to Realtor.com.

At one point in the early 2000s, new home construction outpaced new household growth. But the financial crisis changed that, and builders pulled back. While housing starts picked up again during the economic recovery, growth has been anemic, according to Realtor.com’s report.

Zoning constraints and ballooning construction costs have hampered the construction of both single-family homes and multifamily buildings, said Richard Koss, an adjunct professor at Columbia University who also is chief research officer of mortgage fintech firm Recursion Co.

Still, there are signs that housing production could improve in 2020. Housing starts in December jumped to 1.6 million, marking a 13-year high, according to the U.S. Census Bureau and the U.S. Department of Housing and Urban Development. Just over 1 million of those starts were single-family homes.

But Koss cautioned against looking at one month’s worth of data for substantive change.

“We’ll see in the next couple of months,” he said. “We can always be surprised.”

Write to Mary Diduch at [email protected]


Related Articles

arrow_forward_ios
New York Governor Andrew Cuomo (Credit: Drew Angerer/Getty Images, and iStock)

New York halts most construction

Construction workers in New York City on March 26, 2020 (Credit: Eduardo Munoz Alvarez/Getty Images)

Minority, women-owned construction firms struggle to pay employees, face layoffs: survey

The 30-year fixed rate dropped to 3.5 percent this week (Credit: iStock)

Mortgage rates fall, but who’s buying?

Governor Andrew Cuomo (Photo by Eduardo Munoz Alvarez/Getty Images)

State mulls changing what construction is considered “essential”

Doug Yearley of Toll Brothers and 2686 Broadway (Credit: Google Maps and Toll Brothers)

Who’s still filing permit applications? Toll Brothers, for one

Gov. Andrew Cuomo (Credit: Bennett Raglin/Getty Images)

NY regulators lay out specifics of homeowner mortgage break

Skanska temporarily halted construction at LaGuardia Airport’s Terminal B and Moynihan Train Hall due to workers with Covid-19 (Credit: LaGuardia B and Anuja Shakya)

Two construction sites shut down as workers get Covid-19

Real estate brokers across the country have been adding standardized coronavirus-related legal language and addendums to help buyers manage risk.

The coronavirus clause is now a thing in resi deals

arrow_forward_ios
Loading...