SANTA CLARA, Calif.,
Jan. 21, 2020 /PRNewswire/ -- As
the new decade begins with a strong economy and low interest rates,
home buyers still face a big hurdle -- extremely low inventory. An
analysis released today by realtor.com® found that the 5.9 million
single family homes that were built between 2012 and 2019 are
simply not enough to offset the 9.8 million new households formed
during that time.
At the end of 2019, homebuilder confidence reached a two-decade
high, driven in large part by robust economic growth. Single family
home starts per 1,000 households grew from 4.6 in 2012 to 7.3 in
2019, taking the eight-year average to 6.2. And while that growth
was needed, levels still remain well below the two-decade average,
according to realtor.com®'s findings. Realtor.com® economists
estimate that even with an above average pace of construction, it
would take homebuilders four to five years to get back to
equilibrium.
"Simply put, new home starts are not keeping pace with demand.
Homebuilders have a mountain of opportunity, but a big hill to
climb," said Javier Vivas, director
of economic research, realtor.com®. "The current inventory crisis
and the need for 3.8 million new homes means a nearly insatiable
appetite from potential buyers, especially in the lower end of the
market."
The 2008 financial crisis led home builders to become much more
conservative -- building less and focusing on higher end homes with
bigger margins. As such, the gap between inventory and demand is
focused largely on entry-level and mid-range homes and is
exaggerated by the fact that baby boomers are increasingly aging in
place; not freeing up existing homes for new buyers to enter the
market.
"Large populations of renters and well-qualified potential
buyers with strong incomes are waiting in the wings. Assuming the
economy avoids a full-on recession and rates remain low, the window
for builders remains wide open. If builders can deliver homes at
adequate price points, absorption will continue to strengthen
through the first half of the decade," Vivas said.
Heading into the 2020s, growing demographics and strong economic
fundamentals should continue to underpin home builder confidence.
However, solving the home supply puzzle is more than just a game of
volume, and timing can be tricky. On average, consumers need about
two to three years of solid income and stability to save for a down
payment. With today's strong economy and low likelihood of a
downturn in the next few months, now may be the right time for
builders to make a move, according to the report's findings.
"It's easy to understand why builders have been cautious in an
effort to avoid overbuilding, but we believe that demand for new
homes will remain strong, and homebuilders could represent a bright
spot for housing in the decade ahead," Vivas said.
For more information, read the full report here.
About realtor.com®
Realtor.com®, The Home of Home Search℠, offers the most MLS-listed
for-sale listings among national real estate portals, and access to
information, tools and professional expertise that help people move
confidently through every step of their home journey. Through its
Opcity platform, realtor.com® uses data science and machine
learning to connect consumers with a real estate professional based
on their specific buying and selling needs. Realtor.com® pioneered
the world of digital real estate 20 years ago, and today is a
trusted resource for home buyers, sellers and dreamers by making
all things home simple, efficient and enjoyable. Realtor.com® is
operated by News Corp [Nasdaq: NWS, NWSA] [ASX: NWS, NWSLV]
subsidiary Move, Inc. under a perpetual license from the National
Association of REALTORS®. For more information, visit
realtor.com®.
Media Contact
Nicole Murphy
nicole.murphy@move.com
408-558-7189
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SOURCE realtor.com