Lennar CEO: Housing's 'new normal' defined by tight inventory, rising prices

Dive Brief:

In a post-earnings conference call, Lennar Homes CEO Stuart Miller said that demand and supply in the housing market is so out of balance that even starts of 1 million per year are not enough to meet demand, Business Insider reported.
Miller said that although the housing market is not a "monolith," current production levels, low inventory and high home prices and rents indicate a tight supply and are creating "a new normal " for the market.
Despite pent up demand, Miller said that shortages of labor and land — which he said will likely continue in the foreseeable future — contribute to low inventory, while current high rents and a tight mortgage market "constrain" demand.

Dive Insight:

Despite the current housing market conditions, Lennar still expects "a steady positive homebuilding market" that will result in "slow, steady though sometimes erratic growth."

Last month, the National Association of Home Builders reported that 64% of builders said lot supplies in their regions were low or very low — the highest percentage since the NAHB began tracking that metric in 1997. According to the NAHB, this record-high lot shortage comes at a time of only 1.2 million home starts a year, a sign of just how critical the housing shortage is considering that only 53% of homebuilders reported low lot supply when home starts topped 2 million per year.

Adding perspective to the low supply of housing stock, the Urban Institute's Housing Finance Policy Center reported that single-family construction was up slightly compared to the worst period of the housing crash but that the residential industry was building only six homes for every 10 new households. This gap, the institute said, was spurring home prices and rents higher, creating a housing crisis situation that only government agency policy changes at all levels could solve.

Real estate organizations have urged homebuilders nationwide to increase new home construction, but builders have maintained that increasing regulatory costs, which the NAHB reported can add nearly 25% to a home's price, are keeping them from ramping up construction. However, recent NAHB report found that builder confidence in June was at its highest level since January 2016, which the association said means that the "housing market should continue to move forward in the second half of 2016."