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Tracking Housing Starts

Tracking Housing Starts – Will Our Inventory Crisis Be Relieved?

Inventory issues have been plaguing many areas of the United States for the last several years. Multiple offers and year-over-year double digit price increases due to high demand has become the norm.

The shortage has come from a building industry that was stifled during the recession. On the average, the United States needs 1.5 million new homes built per year to address our population increase and to replace dilapidated buildings. However, in the years since the recession, we have fallen short of that. In fact, we are still not back to where we need to be. In the 12-month period ending in June of 2017, there were 1,215,000 homes completed, 285,000 short of the goal according to the Census Bureau.

Below is a graph of the single-family housing starts since 2000 (in the thousands) according to the Census Bureau. The red line indicates the 1.5 million mark. As you can see, 2000-2006, builders overbuilt which led to a surplus. However, since 2007, the United States has not built the number of homes needed to keep up with demand.

The real estate market is just like the stock market in that prices change based on supply and demand. Markets across the country that have experienced inventory shortages (lack of supply) along with an increase in population (demand) have been also experiencing sharp price increases.

This increase in housing starts means that there is some inventory hope for buyers in the future. This slight increase in inventory will allow buyers more options and will reduce the pressure on prices. However, the country is still in a housing deficit which will need a few more years of recovery.