News of a housing inventory shortage continues to proliferate as the market works in overdrive to try and construct enough houses to meet the high demand.
According to a new study from the National Association of Realtors, single-family home construction is currently lacking in 80% of measured metro areas, even as job creation holds steady across the country right now.
The dearth of houses available is holding back buyers in many of the largest cities in the country, particularly the 10 showcased below, which NAR pulled out in its study.
NAR’s study reviewed new home construction relative to job gains over a three-year period (2013-2015) in 171 metropolitan statistical areas throughout the U.S. to determine the markets with the greatest shortage of single-family housing starts.
Using each metro area’s jobs-to-permits ratio, NAR said it calculated the amount of permits needed in each metro area to balance the ratio back to its historical average of 1.6.
Here are the top 10 metro areas with the biggest need for more single-family housing starts to get back to the historical average ratio are (The higher the number of permits required, the more severe the shortage was in each market):
10. San Diego (55,825 permits required)
9. Denver (67,403 permits required)
8. San Jose, California (69,042 permits required)
7. Seattle (73,135 permits required)
6. Atlanta (93,627 permits required)
5. Chicago (94,457 permits required)
4. Miami (118,937 permits required)
3. San Francisco (127,412 permits required)
2. Dallas (132,482 permits required)
1. New York (218,541 permits required)
“Inadequate single-family home construction since the Great Recession has had a detrimental impact on the housing market by accelerating price growth and making it very difficult for prospective buyers to find an affordable home – especially young adults,” said Lawrence Yun, NAR chief economist.
“Without the expected pick-up in building as job gains rose in recent years, new and existing inventory has shrunk, prices have shot up and affordability has eroded despite mortgage rates at or near historic lows,” Yun continued.
The good news is that although the housing market has been short on inventory for awhile now, it is on the upswing. Yun explained that the ratio in many areas moved slightly downward in 2015 compared to 2014 as builders started to respond accordingly to local supply shortages.
However, Yun noted that it will likely be multiple years before inventory rebounds in many of the markets because homebuilders continue to face a plethora of hurdles, including permit delays, higher construction, regulatory and labor costs, difficulty finding skilled workers and the exhausting process many smaller builders go through to obtain financing.
According to the latest housing start report from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, homebuyers could soon receive much-needed relief from the competitive housing market and increasing home prices as housing starts increased in July both monthly and annually.
The newest housing start report from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development is slated to come out early Tuesday morning.