New Home Inventory Doesn’t Meet Demand

Courtesy of CNBC Image Source Realtor.com

9.8 million new households were formed in the U.S. between 2012 and 2019.  During that same seven years, only 5.9 million new single-family homes were constructed.

In spite of an increased forecast for new construction and a high level of optimism among homebuilders, that still leaves as many as 4 million families in need of housing.

The Trouble With Bubbles

In 2005, right before the housing bubble burst, 1.7 million single-family homes were built—half a million more than averages during the decades leading up to it. This construction peak was a result of the availability of mortgages to practically anyone.  But when those ill-advised mortgages started going into default by the millions, construction practically stopped. In 2011, according to Census Bureau statistics, the number of new construction starts was a mere 431,000.

Since then, it’s been a slow recovery, with 888,000 new starts in 2019. With such modest increases, it’s likely to be another four or five years before inventory can keep up with demand.

This chart shows the pace of new home construction in the last two decades.
Courtesy of Realtor.com

Low-Cost Homes Most Needed

While builders have (understandably) focused on higher-end construction to get their profits back up after the crash, new housing is especially lacking in the lower price range that the new generation of millennial homebuyers can afford.  To further aggravate the situation, reduced inventory causes the prices of available homes to increase due to demand, pricing many average-income families out of the market.

“Simply put, new home starts are not keeping pace with demand. Homebuilders have a mountain of opportunity, but a big hill to climb.”

Javier Vivas, Director of Economic Research at Realtor.com.

Like this article?

Share on facebook
Share on Facebook
Share on twitter
Share on Twitter
Share on linkedin
Share on Linkdin
Share on pinterest
Share on Pinterest
Share on email
Email
Share on reddit
Reddit
Share on print
Print
Share on google
Google+

Leave a comment

Having an Attainable Home, at the end of the day, is an idea. An idea that everyone has the right and the chance to work hard, live comfortably, and have prosperity throughout their life, and we’re happy to say that it’s still possible.

Subscribe to our news & updates

Attainable Home's content is for educational and informational purposes only and should not be taken as professional legal or financial advice. If you feel you need advice, you must consult a professional licensed in the appropriate field. While we do our best to keep these updated, things can change sometimes. Our primary purpose is to help others by providing great content and resources, and we may also have relationships and sources listed on the website that may result in compensation to our company in some form, as our company needs to be financially sustainable by paying all authors well and supporting the online systems. All views and writing are also solely the opinions of the authors and may or may not fully represent the view of the company's.