An improving US labor market is putting home ownership within reach for more and more Americans, but a lack of inventory is driving home prices up at an unhealthy rate, according to the National Association of Realtors (NAR).
“Lagging new home construction — especially single family — has kept available inventory far below balanced levels,” said NAR economist Lawrence Yun.
The average ratio for the change in workers to residential building permits is 1.2 historically, according to NAR, while for single-family homes it is 1.6. Yet many American metro areas are seeing a much higher ratio of new workers enter the market than homes.
NAR looked at job creation and housing starts over the 2012-2014 period in 146 metro areas and found that 63 per cent of markets had a ratio higher than 1.2 for all housing types. Some 72 per cent of markets analyzed had a ratio that was above 1.6 for single-family homes as well, pointing to a shortage in home construction, the trade association said.
The national ratio of all residential permits to employment jumped up 50 percent to 2.4 in 2014. For single-family homes, that ratio reached 3.7.
Three of the metro areas with the largest housing shortfall were in California, which is also home to four of the 10 most expensive cities in which to rent a one-bedroom apartment.
San Jose led with a ratio of job growth to new single-family residential permits of 22.6, while San Francisco trailed at 22.4 and San Diego and New York tied for third at 13.9.
That said, potential homebuyers might want to look to the following cities which have ratios of 1.6, which NAR says means “housing starts are seen as nearly adequate to local job growth”: Jackson, Miss.; Colorado Springs; Chattanooga, Tenn.; Amarillo, Tex.; and St. Louis.
Looking forward, Yun said that the pool of homebuyers will continue to grow as more jobs are created.
“That’s why it’s crucial for builders to begin shifting their focus from apartments to the purchase market and make up for lost time,” he said. “If not, severe housing shortages and faster price appreciation will erode affordability and remain a burden for buyers trying to reach the market.”