Single-family home construction is currently lacking in 80 percent of metro areas, despite steady job creation.
And the low activity is creating a housing shortage crisis that is curtailing affordability and threatening to hold back prospective buyers in many of the largest cities in the country, according to new research from the National Association of Realtors.
New York topped the list of metro areas in need of more single-family housing starts to get back to the historical average ratio, followed by Dallas, San Francisco, Miami and Chicago .
NAR’s study reviewed new home construction relative to job gains over a three-year period (2013-2015) in 171 metropolitan statistical areas1 (MSAs) throughout the U.S. to determine the markets with the greatest shortage of single-family housing starts.
The findings reveal that single-family construction is startlingly underperforming in most of the U.S., with markets in the West making up half of the top ten areas with the largest deficit of newly built homes.
Lawrence Yun, NAR chief economist, says a large swath of the country continues to be plagued by inventory shortages exasperated by critically low homebuilding activity.
“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,” he said.
“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.”
NAR analyzed employment growth in relation to single-family housing starts from 2012 through 2015.
Historically, the average ratio for the annual change in total jobs to permits is 1.6 for single-family homes. The research found that 80 percent of measured markets had a ratio above 1.6, which indicates inadequate new construction in most of the country.