SEATTLE, June 10, 2021 /PRNewswire/ -- Relaxing
zoning rules would be the most effective way to increase supply in
a housing market currently near historic inventory lows, experts
say in the latest Zillow® Home Price Expectations
Survey.i On the current path, those experts anticipate
new construction growth to stall and home prices to rise, resulting
in fewer of today's 30-somethings owning homes.
High costs are expected to slow new construction momentum, which
would be a blow to home shoppers who are already facing an
intensely competitive market with relatively few available homes
when compared to the number of interested buyers. On average, the
panel expects new housing starts to end the year 2.5% below
December 2020 levels, and to fall an
additional 2% by the end of 2022. Panelists cited the high cost of
labor, materials and land as the biggest headwinds for home
builders.ii
"A prediction for a construction slowdown is surprising given
recent positive readings, but it's clear the panel believes rising
costs will drag down the pace of construction from its impressive
speed this spring," said Zillow senior economist Jeff Tucker. "Builders have been firing on all
cylinders to meet the excess demand from buyers left unmet by the
existing home market, and demand appears poised to stay high for
years to come. But builders will need more than willing buyers to
close the massive shortfall since the Great Recession. They need
buildable land, and the panel overwhelmingly pointed to zoning
changes as a leading way to move the needle, with the potential to
open up enough building capacity to add millions of homes."
When asked what could be done to increase housing supply,
relaxing zoning rules was the runaway top choice. Previous Zillow
research has found even a modest amount of upzoning in large
metro areas could add 3.3 million homes to the U.S. housing stock,
creating room for more than half of the missing
households since the Great Recession -- a major reason for
today's frenzied housing demand. A majority (57%) of homeowners
Zillow previously surveyed believe they and others should be
able to add additional housing on their property, and 30% said they
would be willing to invest money to create housing on their own
property, if allowed.
Other recommendations to increase housing supply according to
the panel include easing the land subdivision process, relaxing
local review regulations for projects of a certain size,
accelerating the adoption of new construction technologies and
increasing training to build up the construction
workforce.
New construction is of course not the only path to more
inventory -- a majority of the same panel, when surveyed in Q1
2021, said they expect housing inventory to begin growing again
this year, with an increase in existing homes being listed for sale
being the most likely catalyst for inventory growth. Previous
Zillow research has shown widespread coronavirus vaccine
distribution would make 14 million households newly comfortable
moving.
With housing demand showing no signs of slowing from a
pandemic-fueled boom in the second half of 2020, the expert panel
has once again adjusted their home price growth expectations
upward. The panel's average home value growth prediction for 2021
is 8.7% -- the highest for any year since the inception of the
quarterly survey in 2010. That's up from 6.2% last quarter and more
than double the expectation from the Q4 2020 survey (4.2%). Home
value growth is expected to moderate down to 5.1% in 2022,
according to the panel, which would still be strong growth compared
to a historical average of about 4%.
"A profound shift in housing preferences, adoption of remote
employment, low mortgage rates, and the recovering economy continue
to stoke demand in the single-family market and drive prices
higher," said Terry Loebs, founder
of Pulsenomics. "Strict zoning regulations, an acute labor
shortage, and record-high materials costs are constraining new
construction, compounding disequilibrium, and reinforcing
expectations that above-normal rates of home price growth will
persist beyond the near-term."
Average rates for a fixed 30-year mortgage currently sit
near 3%. Panelists expect a small rise to 3.45% by the end of the
year, continuing to 3.99% at the end of 2022.iii That
would add $55 to a monthly
payment on a typical home at the end of this year, and
$124 at the end of 2022. Still, this
would represent a bargain historically. Average rates were near 5%
as recently as 2018, and they started the 2000s above 8%.
In large part due to affordability challenges from rising home
prices, the panel on average expects homeownership among 35-44
year-olds will drop slightly over the next five years, when that
group will be dominated by millennials. The majority (54%) of
experts who expect homeownership to fall among this age group by
2026 cited worsening affordability, via higher mortgage rates
and/or home prices, as the top cause.
Of the more optimistic panelists who anticipate more homeowners
in this age group, most (61%) said an increased preference to own
instead of rent would be the primary driver, possibly because of
how the pandemic and the rise of remote work options has changed
what we want and need in a home.
Action to
Potentially Increase U.S. Housing Supply
|
Panel
Score*
|
Relax zoning
rules
|
111
|
Ease the land
subdivision process for landowners
|
63
|
Relax local review
regulations for projects of a certain size
|
61
|
Accelerate adoption
of new construction technologies (e.g., modular building, 3D
printing of certain components)
|
55
|
Increase trades
training/education to build construction workforce
|
54
|
Reduce mandatory
minimum lot sizes
|
44
|
Relax work permit
restrictions
|
26
|
Provide tax
incentives for private development of municipal
infrastructure
|
25
|
Relax restrictions on
Accessory Dwelling Units
|
20
|
Incorporate price
protection clauses into long-term supply procurement
contracts
|
17
|
Improve access to
construction financing
|
13
|
*Panelists were
asked to select up to three options, and rank in order of expected
effectiveness. Scores were computed by weighting the factors
selected by their effectiveness ranking.
|
About Zillow Group
Zillow Group, Inc.
(NASDAQ: Z and ZG) is reimagining real estate to make it easier to
unlock life's next chapter.
As the most-visited real estate website in the United States, Zillow® and its affiliates
offer customers an on-demand experience for selling, buying,
renting or financing with transparency and nearly seamless
end-to-end service. Zillow Offers® buys and sells homes directly in
dozens of markets across the country, allowing sellers control over
their timeline. Zillow Home Loans™, our affiliate lender, provides
our customers with an easy option to get pre-approved and secure
financing for their next home purchase. Zillow recently launched
Zillow Homes, Inc., a licensed brokerage entity, to streamline
Zillow Offers transactions.
Zillow Group's brands, affiliates and subsidiaries include
Zillow®, Zillow Offers®, Zillow Premier Agent®, Zillow Home Loans™,
Zillow Closing Services™, Zillow Homes, Inc., Trulia®, Out East®,
StreetEasy® and HotPads®. Zillow Home Loans, LLC is an Equal
Housing Lender, NMLS #10287
(www.nmlsconsumeraccess.org).
About Pulsenomics
Pulsenomics LLC
(www.pulsenomics.com) is an independent research firm that
specializes in data analytics, opinion research, new product and
index development for institutional clients in the financial and
real estate arenas. Pulsenomics also designs and manages expert
surveys and consumer polls to identify trends and expectations that
are relevant to effective business management and monitoring
economic health. Pulsenomics LLC is the author of The Home Price
Expectations Survey™, The U.S. Housing Confidence Survey, The
Housing Confidence Index, and The Transaction Sentiment Index.
Pulsenomics® , The Housing Confidence Index™, The Transaction
Sentiment Index™, and The Housing Confidence Survey™ are trademarks
of Pulsenomics LLC.
i This edition of the Zillow Home Price Expectations
Survey surveyed 109 experts between May 11,
2021 and May 25, 2021. The
survey was conducted by Pulsenomics LLC on behalf of Zillow, Inc.
The Zillow Home Price Expectations Survey and any related materials
are available through Zillow and Pulsenomics.
ii The verbatim answer options most often cited by
panelists as headwinds were "high labor costs/shortage of skilled
construction labor," "high/volatile materials costs," and "high
land costs/lack of developable parcels in desirable areas."
iii Assuming a 20% down payment on a home purchased for
$280,370, the typical home value in
April according to the Zillow Home Value Index.
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SOURCE Zillow