We Need to Build More Homes
Home construction sees historic lows, contributing to spiked prices
Various well-known reasons explain why there’s record demand in the current housing market. Pandemic-spurred lifestyle shifts, the huge millennial generation coming to an age and financial situation aligned with homeownership, and changing location priorities are pushing people to move and buy homes at record speed.
The other piece of the ultra-competitive housing market puzzle? Low supply. With recent insights into building shortages, it’s not hard to see why buying an existing home can feel close to impossible in many areas right now.
What’s Happening?
A new National Association of Realtors (NAR) report revealed that construction in the U.S. housing market has fallen 5.5 million units short of historical levels in the past 20 years. This shortage encompasses every variety of housing type: affordable housing, single-family, and multifamily units are all far below historical levels and far short of demand.
The shortage makes housing increasingly unaffordable. In April, the median price for an existing home was up 19% from April of 2020. At the end of January, there were only 1.03 existing homes on the market — a record low since at least 1982.
While experts differ on the exact numbers behind the housing deficit, it’s clear that existing supply does not align with current demand.
Why?
The pandemic is partially to blame for these issues, with many builders pausing projects or stopping construction altogether to adhere to COVID precautions and regulations. But the decrease in building began long before that, after the 2008 crash, when the housing market saw uncertain and unprofitable times.
In 2020, as demand made a clear spike, builders began to try to catch up, but shortages in labor and in materials like lumber and appliances continued to keep production too slow to catch up. Even if building regains its peak 2005 pace of 2.1 million units a year, it’ll take about a decade for the deficit created in the past 20 years to close.
Many organizations are now pushing for an infrastructure plan incorporating tax credits that would help with low-income housing and renovating distressed properties, among other policies.
What it means for buyers and builders
In short, these numbers speak to the need to keep building. With the millennial generation continuing to reach home buying age and interest rates expected to stay low for at least a couple of years, demand is unlikely to slow down anytime soon. And with such a large gap in supply, even if demand did plateau a bit, home values are expected to stay high.
With the cost of lumber finally taking a dive, tax credits on the horizon, and labor shortages easing, now is the time to build new homes. While many homes will likely pop up in developments with many similar-looking houses, some buyers are opting to build custom instead.
Control the look and feel of your new home while prioritizing your family and lifestyle. With experts to help you each step of the way, custom home building has never been simpler! Get started with the Atmos team today.
