New Construction- Why the Time to Build is Now
The current home construction rate is 1.3 million which means, it’s way behind the estimated 2.3 million of single-family homes over the last 10 years. Though the exact new home sales have increased to 2.4% last year, the numbers are still not enough compared to the houses built a decade ago.
It can be recalled from 1985 up to 2000 there were at least 3.9 single-family residence-building permits given for every 1,000 residents. As of this year, it has decreased to 2.6
One factor that also affects the construction shortage is the slowing population growth.
It may be more appropriate to look at permits per increased population. The analysis shows that for the past 10 years, new permits per capita for just the increase population also are below the historic norms and continue to decrease.
Meanwhile, another argument on why does the home construction rate had decrease is due to the migration in the country that create deficit and of course, surplus. Among the largest 35 metros only the following locations are obtaining residents as well as issuing permits at historic rates:
An analysis of housing permits since 2008 does not take into account the housing boom, during which builders created a surplus of homes, particularly in certain parts of the country.
From 2000 to 2008, U.S. permits per capita were 17.4 percent higher than the previous 15 years. This resulted in 1.6 million more permits than would have been expected if the rate had stayed the same. It’s possible, even likely that some markets are still working off that surplus.
In addition to that, during the housing bubble, here are the major metros that were able to received permits but never experience or cited new construction projects:
- Washington D.C.
- New York
- Los Angeles
- San Francisco
- San Diego
- San Diego
Demolitions and vacancies also deplete the housing stock, pressing remaining homes into longer service. Between 2005 and 2006, the number of structures built before 1990 dropped by 732,000 or 0.8 percent. This is likely due to demolitions and vacancies. Between 2015 and 2016, the number of structures built before 2000 dropped by only 530,000 or 0.5 percent.
Another angle that we should check would be the increasing age of existing homes.
Whereas, in 2007 there are houses built 21 years ago then in 2017 it become as older as 34 years. Going back in 2006, at least 10% of existing homes were built just last 10 years while 32% were 56 years older.
In addition to that, 4% of the houses were built 10 years and 39% were older than 56 years in 2016. Others may think that the solution for the housing shortage is none other than smaller families should share households, which is occurring.
People can also shift from single-family to multi-family residences. However, the share of households in single-unit structures is 61.5 percent. This is virtually unchanged from 60.3 percent in 2000, which indicates that no such shift has occurred. To learn more about new home construction and purchasing land lots for building, contact an expert member of the Land Wealth team.