The new home construction industry got hit hard when the recession hit about a decade ago… which is also when inventory started its long decline.
Of course the overall housing inventory shortage was even worse last year because of Covid-19, but while many homeowners paused their plans to sell during the height of the pandemic, this isn’t the main cause of today’s huge gap between supply and demand. Sam Khater, Vice President and Chief Economist at Freddie Mac, Economic Housing and Research Division, shares:
“The main driver of the housing shortfall has been the long-term decline in the construction of single-family homes . . . That decline has resulted in the decrease in supply of entry-level single-family homes or, ’starter homes.’”
When you consider the number of homes built in the U.S. by decade, the serious lack of new construction is clear (See graph below):
The above numbers are for the whole US, with new construction for the last decade about half that of the previous decade. When I looked at new construction for March 2021 in the Twin Cities, it was about half what it was in March 2020… the national trend of the previous 10 years echoed in a single year in a single month. Builders are trying… but the supply chain has been so difficult it is even harder to keep up with demand.
The housing shortage is due to a number of factors, but the lack of new construction is playing a significant role.
