Photo: Robert Clark
Lack of inventory is one of the biggest challenges facing US homebuyers today, as home building rates have dropped substantially following the housing bust in 2008.
If historic building rates had continued over the last ten years, then over 6 million additional single-family homes could have been added to the national housing stock, according to a newly released report by the listing site Zillow.
“Building activity came to a near-standstill when the housing market collapsed, and now a decade later, years of underbuilding have left a gap of millions of homes missing from the American housing stock,” Zillow Senior Economist Aaron Terrazas says in the digital release.
Between 1985 and 2000, some 3.9 permits were issued for single-family homes per 1,000 people. But since 2008 — the decade following the housing collapse — that number has fallen to 1.9 permits per 1,000 people.
Theoretically, had the building pace not been altered following the crisis, there would be about 6.3 million more single-family homes on the market today.
These homes would greatly help to relieve the current upward pressure on pricing — particularly at the lower end of the market, or entry level — due to limited inventory.
Zillow estimates that it would take close to five years of building at the current pace of 1.3 million homes per year just to add those “lost” homes to the country’s housing stock.
Of the 35 metros analyzed for the report, Houston, TX was the only metro that kept up its pre-crisis building pace over the last 10 years, issuing more residential building permits than there would have been at the historic rate.
Las Vegas, NV slowed the most in the decade following the bust. Permit activity in the metro dropped from 14.4 permits for every 1,000 residents prior to the boom to 3.2 permits for every 1,000 residents after the bust.
The national lack of inventory has led to one of the most competitive housing markets in years.
“Without a sustained pickup in permitting and construction activity, first-time buyers will struggle to gain a foothold on homeownership,” Terrazas says in the report.
Meantime, since fewer new homes are being built, the current housing stock is getting older.
The median age of houses that were sold in 2007 was 24 years, and by 2017 that number increased to 37 years. Older homes tend to present a different set of challenges, including costly maintenance and upkeep as structures age.
That figure includes everything from lawn and pool maintenance to a simple toilet replacement.
High maintenance costs on an older house coupled with rising home prices as inventory tightens could price some prospective homebuyers out of the market entirely.
“Maintenance costs should be on the radar for anyone considering buying a house, regardless of the market. In the pricier markets such as San Jose and NYC, any potential homeowner should really look into what the real costs of homeownership are,” Porch CEO Matt Ehrlichman tells Livabl.
Click here to read the entire report.