Dive Brief:
- New York City is No. 1 on the National Association of Realtors' Top 10 list of U.S. metros that need to increase construction of single-family homes.
- Overall, 80% of metros in the NAR study do not have enough single-family stock to meet demand, a condition that has kept many potential homeowners out of the market and made homes less affordable.
- The lack of new home construction has piled on to the existing problem of already-thin housing inventories and high prices, making the situation even worse, particularly for young, first-time buyers who need a property with an entry-level price tag, according to NAR Chief Economist Lawrence Yun.
Dive Insight:
Robust employment growth combined with record-low mortgage rates have increased demand for homes, but construction is lagging so much that, in some markets, even those who qualify for a home can't find one at the right price point. According to the NAR, the level of single-family home construction should be at a change-in-total-jobs-to-new-home-permits ratio of 1.6. The following are the metros that need the most single-family home starts to catch up to that average:
- New York (218,541 permits required)
- Dallas (132,482)
- San Francisco (127,412)
- Miami (118,937)
- Chicago (94,457)
- Atlanta (93,627)
- Seattle (73,135)
- San Jose, CA (69,042)
- Denver (67,403)
- San Diego (55,825)
Yun cautioned that there are also relatively smaller metros that didn't make the Top 10 list but that are still behind in adequate levels of construction, which is negatively affecting the local home markets in those areas. The NAR said Pensacola, FL, Huntsville, AL, Columbia, SC, and Virginia Beach, VA are examples of metros where single-family-home construction is currently keeping pace with demand.
Perhaps as a sign of potential relief coming, the Commerce Department reported last month that July housing starts increased 2.1% from June to a 1.211 million annualized rate. Year over year, housing starts were up 5.6%. According to the National Association of Home Builders/Wells Fargo Housing Market Index, builder confidence is up this month, buoyed by increased construction and home sales, which, according to the NAHB, indicates a slow and steady recovery as homebuilders start to feel more comfortable ramping up construction.
