The housing market’s weakest link is about to get weaker as homebuilders stay on the sidelines amid the COVID-19 pandemic.
Housing starts that measure how many single-family homes builders break ground on probably will fall to 770,000 this year, the lowest level since 2015, as the economic fallout from the COVID-19 pandemic makes it tough to do business, according to a forecast from Lawrence Yun, chief economist for the National Association of Realtors.
Economists who at the start of 2020 were projecting the biggest year for homebuilding since 2007 now are saying construction won’t be able to solve the historic dearth of homes for sale. The 1.47 million properties on the market at the end of April was the lowest ever recorded for the month, according to NAR data.
“The lack of inventory is a major bottleneck to growth,” Lawrence Yun, NAR’s chief economist, said in an interview with HousingWire. “There is a tremendous amount of buyer interest, and the supply is not catching up with the growth in demand.”
Americans created 11.4 million households in the 10 years through 2019, according to Census data. Builders sold 5.2 million single-family homes in the same period. In the prior decade, they sold 10.4 million new houses, according to government data.
The shortage of homes for sale plagued the housing market long before the COVID-19 pandemic, Yun said. But, the supply disruptions and the lockdowns that ensued have only made it worse.
While the elevated unemployment rate in April and May are also a challenge to the housing market, reducing the number of people who qualify for mortgages to buy homes, the housing market still doesn’t have enough supply to meet the demand from the employed share of Americans who want to purchase properties, he said.
Next year should be better, said Yun, who is forecasting 940,000 single-family home starts for 2021, which would be the most additions to the housing market since 2007, the year before the financial crisis.
“The temporary disruptions due to economic lockdowns will hopefully all be made up for next year,” Yun said. “Demand is clearly there. Homebuilders will recognize that if they just build it, there will be people knocking on the door.”