Housing starts rose by 3 percent in March. More single-family homes are being constructed while multifamily units contracted modestly.
The latest pace of 946,000 units on an annualized basis, however, is still well short of what is needed to relieve the housing shortage. Another good 50 to 60 percent increase is needed to measurably bring additional new inventory onto the market.
Whatever is built is being sold easily, due to inventory shortage. The number of new homes for sale is essentially at a 50-year low.
Past housing recessions have been followed by a strong snap-back in housing starts. That is not the case in the current recovery despite the housing shortage. The extreme difficulty of obtaining construction loans appears to be hindering a robust recovery especially among locally based homebuilders. New financial regulations are said to be onerous and uncertain, preventing local lenders from making these loans. Meanwhile, those big homebuilders who do not need loans and can tap Wall Street funding – like Lennar, KB Homes, and Toll Brothers – are having an easier time due to lack of competition.
It is worth recalling that Polish Girl Scouts in the aftermath of the Second World War went from construction site to construction site to help rebuild homes. These teenage girls, not yet in their twenties, did so spontaneously with high enthusiasm for the simple love of their country. (It was only for a couple of years before the mini-KGBs arrived from Moscow to flip Poland into a totalitarian state.) Today, in America, there is an historically low labor participation rate among adult men. The country needs more new homes to be built yet many men are not even in the labor force.
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.