With homes selling the first weekend they hit the market and a shortage of available listings driving home prices to record highs, you might think homebuilders would be busy. They aren’t.
The Commerce Department reports that applications for new building permits for future residential construction fell in May to a seven-month low. The number of homes that were completed also fell, suggesting that there won’t be any relief for buyers in the immediate future.
The only good news in the report for people hoping to buy a home was an increase in housing starts. Groundbreaking activity rose 3.6% to a seasonally adjusted annual rate of 1.572 million units last month.
Industry analysts say builders have faced a number of headwinds since the economy reopened. There’s been a shortage of building materials like lumber, which has skyrocketed in price and cut into profit margins. The labor shortage has also limited operations and contributed to higher costs.
The National Association of Realtors (NAR) says there’s a “housing supply crisis” and is calling for a government response. The group has issued a report that traces the problem to the crash of the housing market during the financial crisis of 2008.
At least 5.5 million more houses needed
Since 2008, home building has occurred at about half its previous rate. The NAR report estimates that the U.S. has built 5.5 million to 6.8 million fewer homes than needed since 2000.
"The state of America's housing stock is dire, with a chronic shortage of affordable and available homes [needed to support] the nation's population," the report states. "A severe lack of new construction and prolonged underinvestment have led to an acute shortage of available housing.”
The bottom line, the report concludes, is that building levels have declined while demand has risen, creating an “enormous” supply gap. The authors say a major national commitment is needed to produce all types of housing. Among specific policy recommendations, they said Congress must work to expand access to resources, remove barriers to and incentivize new development, and make “housing construction an integral part of a national infrastructure strategy.”
"There is a strong desire for homeownership across this country, but the lack of supply is preventing too many Americans from achieving that dream," said Lawrence Yun, NAR's chief economist. "It's clear from the findings of this report and from the conditions we've observed in the market over the past few years that we'll need to do something dramatic to close this gap."