There’s one word that’s been hovering over the housing market for a couple of years now, one you hear whenever questions about first-time homebuyers arises. That word is “inventory.”
With so few houses available for purchase, it’s no wonder affordability has become an issue for so many buyers.
New research from the National Association of Realtors points out the areas of the country where the inventory shortage is most acute.
“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,” said NAR chief economist Lawrence Yun in a press release.
“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.”
From 2012 through 2015, NAR analyzed employment growth in relation to single-family housing starts in 171 cities, and compared them to the average ratio for the annual change in total jobs to single-family housing permits, which is 1.6. Eighty percent of measured markets had an average ratio of 3.4 — which points to a serious inventory shortage.
The 10 most affected markets would need anywhere from approximately 55,000 to 218,000 permits to meet the national average:
- New York City (218,541 permits required)
- Dallas (132,482 permits required)
- Houston (55,661 permits required)
- Atlanta (93,627 permits required)
- San Francisco (127,412 permits required)
- Miami (118,937 permits required)
- Chicago (94,457 permits required)
- Seattle (73,175 permits required)
- Denver (67,403 permits required)
- Phoenix (55,540 permits required)
Yun says these shortages aren’t due to a lack of demand for single-family homes; the incomes of would-be buyers simply aren’t keeping up with booming home prices, he says.
On the other hand, there are a few measured markets sprawled across the South that boast a healthy job growth to single-family starts ratio:
- Pensacola, Florida
- Huntsville, Alabama
- Columbia, South Carolina
- Virginia Beach, Virginia
Looking forward, Yun predicts it will take a few years for these markets to rebound due to homebuilder obstacles such as “permit delays, higher construction, regulatory and labor costs, difficulty finding skilled workers and the exhausting process many smaller builders go through to obtain financing.”