Single-family home construction in the U.S. has never really recovered from the 2008 market crash. In fact, ever since that year, permits for new single-family homes have been issued at significantly lower rates, causing the U.S. to miss out on an estimated 6.3 million more new homes, according to a new study from from real estate technology giant Zillow.
From 1985-2000 there were 3.9 single-family home permits issued annually per 1,000 residents, but that number has declined significantly in the last decade. Since 2008, there have been just 1.8 single-family home permits issued every year per 1,000 residents.
If the 1985-2000 rate had held steady through the 21st century, there were be approximately 6.3 million more homes throughout the U.S., the study found. At the current rate that permits are being issued, it would take approximately five years just to make up for all the homes we’ve missed out on.
“Building activity came to a near-standstill when the housing market collapsed, and now a decade later, years of under-building have left a gap of millions of homes missing from the American housing stock,” said Aaron Terrazas, Zillow’s senior economist, in a statement.
The U.S. housing market has been marked by rising prices and low inventory, according to the study. Inventory has been falling on an annual basis for 41 months – although at a slower rate than before – and with limited inventory comes fierce competition for homes, the study says. The median home value, in more than half of the nation’s largest markets, has risen above pre-recession peaks, the study says, hitting an all-time high earlier this year and continuing upward in many cases.
“In nearly every major market today, single-family homes are being permitted at a lower rate than they were historically as builders face a number of challenges in adding new homes, including land and labor costs,” said Terrazas. “What this means for buyers is a smaller supply of homes on the market, leading to increased competition and higher home prices.”
“Historically, population growth has been met with new construction and new construction was a critical contributor to new inventory,” added Terrazas. “Without a sustained pickup in permitting and construction activity, first-time buyers will struggle to gain a foothold on homeownership.”
Houston is the nation’s only market to keep up with its pre-bubble building pace – and even surpass it, according to the study. The permit pace in Las Vegas saw the biggest decline as the recession hit, falling from 14.4 permits per 1,000 residents to 3.2 permits per 1,000 residents over the past decade, the study says.
Another side-effect of the inventory crunch is that existing homes are getting older. The median age of homes sold in 2007 was 24-years-old, according to the study. In 2017, the median age of homes sold jumped to 37-years-old, which, according to the study, brings a new set of challenges around home maintenance.