There is a shortage of 1.35 million new homes since the Great Recession in the 35 largest US real estate markets, according to a new report from Zillow.
This is equivalent to having no new homes built for 2.7 years, the company said.
Manufacturers are rushing to catch up, but supply chain disruptions and labor shortages are slowing their efforts.
The biggest new construction shortages since 2008 have been in Dallas, Miami, Phoenix and Seattle. Chicago, Pittsburgh and Detroit have the biggest surpluses.
Supply chain, labor issues and pricing
At the same time, supply chain disruptions and labor shortages inevitably have an effect on prices. “Home builders and general contractors have kept their prices lower during the pandemic to win bids against competitors, but they are no longer willing to take a hit on profits with materials prices skyrocketing at 13. 2% over 12 months, since October 2021 ”, Andreis Bergeron (non relation), head of brokerage operations at Awning.com, declared GlobeSt.com.
“With a shortage of more than 5.5 million homes nationwide, we still have several years before the supply is able to meet the demand for home purchases,” he continues. “Over the past few years we’ve seen aggressive year-over-year and month-to-month price growth and I don’t see this market turning into a buyer’s market anytime soon. . ”
Bergeron said that historically real estate has been a cyclical asset class and buyers should expect the hyper-competitive market downturn seen in the spring and summer.
“While I expect both speed and prices to slow in the coming months, macroeconomic forces such as higher inflation, historically low interest rates and insufficient supply of home inventories will continue to increase. drive up prices, ”he said.
Fierce competition for homes that exist
Additionally, the Freddie Mac Home Price Index is an accepted industry standard for home price growth “and over the last year we have seen price growth of 20%,” said Bergeron. “FMHPI forecasts price growth to slow to 4.4% for 2022. Although this is significantly lower than growth in 2021, buyers will still see competition.”
In Texas, during the summer, Awning.com customers constantly needed to run deals ranging from 7% to 15% rather than asking to win deals.
“It was not uncommon to be competing with 10 to 20 buyers,” he said. “Over the past few months, that has changed. While we are certainly not looking to a buyer’s market, buyers should expect a chill in the winter. This should allow buyers of homes with less attractive terms like longer inspection periods and FHA loans to stand a chance of winning the deal.
Highest residential building permits since 2007
There is progress on the surface: New home construction in the United States hit a major benchmark in February, when more than 1.5 million residential building permits were issued in the previous 12 months, a reported Zillow.
This level of activity indicates a real estate boom that has not been seen since August 2007. The momentum continued throughout the summer, reaching 1.69 million permits in the year ending August. . This construction boom has drawn comparisons to the glut that characterized the Great Recession, but in truth, builders are only beginning to fill the gap in unmet demand that was dug in the fallout of the mid-1990s housing crisis. 2000s.
“Over the past few months, builders have stepped into the metal to build new homes and meet strong demand, and we’ve just seen the first full year of above-average construction since the mid-1990s real estate crash. 2000, “said Jeff, senior economist at Zillow. Tucker said in prepared remarks. “This is not so much a new round of the new construction boom as an attempt to revenge the latest collapse. There is still a long way to go to catch up with over a decade of slow construction, and some markets have more time to travel than others.
Decrease in average household size
It’s also not clear whether simply keeping pace with pre-recession construction is enough to meet current demand, Zillow reported.
The average household size is about as small as it has ever been–there are about 2.5 people per household now, up from three people per household as recently as the mid-1970s–which means more houses are needed as the population increases.
There are also millions of ‘disappeared’ households over the past 15 years: households headed by people who, historically, should have their own homes at their current age but were unable or unwilling. move on their own. These households should be taken into account when considering how many homes to build, according to Zillow.