Lowest Housing Starts Since World War II

At the projected 551,000 rate for new housing unit construction this year, it would be the lowest since at least 1945. Data in prior years are a bit sketchy, other than knowing that there was nearly zero construction during the Depression years of the 1930s.

So with population at 312 million in the U.S. today and rising by 3 million each year, housing starts are on track to be lower than when the U.S. population was only half its current size, more than 50 years ago.

The low construction also means that there will be a faster return to a healthier market. Inventory is thinning out. Home prices have shown stabilizing signs.   Low new housing starts will mean even further dents in overall inventory and a better chance for a home price recovery ahead. This time last year, many economists were calling for another major downturn in home prices as the homebuyer tax credit went away. The fact is that home prices will be down only modestly in the low single-digits this year. The very low home construction has helped minimize the home price decline potential.

Now, with housing starts so low, some investors are buying properties before a possible housing shortage develops in the upcoming years. Investors are also buying as a hedge against inflation (since gold, another hedge against inflation, appears very pricey). Both homebuilders and the banks – the providers of construction loans – will soon realize the housing market recovery potential. Therefore, housing starts will rise from 2012 on, to about 600,000 in 2012 and 800,000 in 2013. That pace will still be well below the historical average of 1.5 million housing starts that would be needed each year.

starts

Lawrence Yun, PhD., Chief Economist and Senior Vice President

Lawrence Yun is Chief Economist and Senior Vice President of Research at NAR. He directs research activity for the association and regularly provides commentary on real estate market trends for its 1 million REALTOR® members.

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Comments
  1. Great news Mr. Yun!

    It brings to mind two things. What a great time to buy a home and what a great time to be a Realtor. I am excited about the turn around that your message is conveying and looking forward to combining it with being a Realtor in the second best place to retire that being Las Cruces NM.

  2. I have been saying this for years. This shortage will be worse than after WWII for the following reasons; 1. There is no new land development in the pipe line, it takes 18-24 months to purchase, zone and development new dirt. 2. Our population is increasing, ie births, immigration and longer life, 3. Existing housing stock is shrinking due to; natural disasters and deterioration, 4. There are fewer building suppliers; they all got wiped out in the recession, 5. There are fewer trained contractors, they all went to other industries or retired, there is no new job training for the trades because of no demand.. 6. People double and tripled up to save money, living with parents and grandparents is going to get old as soon as these people get jobs they will want to live in their own place. 7. The new Dodd Frank Act, putting unreasonable limitations on the Banks ability to lend money to developers is only going to further exasperate the housing shortage and price increase soon to happen.

    Hal Hanstein, CCIM
    President, Cardinal Realty Group

  3. TV

    Buyers Market is great for : the investors who are buying before a possible housing shortage develops and also are buying as a hedge against inflation. Thank you for info. TV aka TVBuySellRE.com

  4. manny fonseca

    Mr.Yun,
    thank you for your article. I completely agree that with the rise in pollution in the U.S as you described, the existing home inventory should thin out causing property values to recover quicker than anticipated .I also think that the attraction of foreign Real Estate investor in the U.S is contributing to a speedier recovery.
    If the cost of material, labor, etc for new contruction remain high. new contruction housing start will continue to suffer.

    manny