Meeting the Demand for Housing

Blog posted On January 26, 2017

There has been continued discussion about “tightened inventory” in the housing community over the past year.  Home prices are appreciating, new home buyers are entering the market, and demand is on track to outpace supply.  However, there are other factors besides inventory availability influencing the tight housing market.

The National Association of Home Builders’ Chief Economist Robert Dietz reported there is less than a five-month supply of single family homes on the market today.  Redfin cites this as an average number.  In popular metro markets like Denver, CO and San Francisco, CA inventory is even tighter, at a less than three-month supply.  Lending conditions were challenging for homebuilders since 2008, but are starting to ease.  Dietz stated, “over the last few years, we’ve seen loan growth in excess of 15% on a year-over-year basis.”

While the lending conditions improve, homebuilders face land and labor issues.  In an NAHB survey, 64% of builders reported lot supplies as “low” or “very low.”  During the recession, the residential construction industry lost 1.5 Million jobs, and since then has only replaced approximately 600-700,000.  They are also dealing with an aging workforce, with median age of a construction worker reaching over 40. 

Despite shortages in land and labor force, improved lending conditions bode well for the housing industry.  Dietz proclaimed, “we’re effectively just shy of 60% of the way back to normal conditions.”  Housing posted strong numbers in 2016, and with continued momentum can set the market up for success in 2017.

Sources: MarketWatch