OpinionMarkets & Economy

Why aren’t homebuilders building more homes?

There needs to be a shift in government policy so that we can make it easier for builders to do what they do best
  • Government regulations, land, rising labor and material costs all contribute to the lack of new home completions.

Housing markets all across the U.S. are suffering from serious shortages of homes for sale, and this isn’t expected to change in the foreseeable future. When I think about inventory levels and the fact that demand is clearly outstripping supply, it makes me question why homebuilders aren’t stepping up to the plate to meet all this pent-up demand. Interestingly enough, there are several obstacles holding builders back that I think are worthy of further discussion. According to my calculations, since 2008, builders have started construction of new single-family homes at an average annual rate of about 594,000 units per year. For context, the average annual rate of new-home starts between 1963 and 2007 was over 1.1 million, so we have been behind the ball for some time now. Although new-home starts have now risen to 835,000 units from the historic low of 353,000 units that we saw in 2009, we are still well below the level that meets demand given new household formations. ...