Housing supply is one of the major challenges that the housing market has faced for the last several years. With the pandemic and favorable demographics intensifying the demand for housing even further, it may now be more imperative than ever to build more homes. In fact, there are about 680,000 fewer homes available for sale across the country compared to the average number of active listings in the last 5 years. As a result, the housing inventory shortage has pushed national home prices in April to a new record high at $342,000. If home prices continue to rise at this pace, many would-be homebuyers will be priced out of the market thus hurting homebuying activity. The good news is that housing inventory is rising with construction to pick up further in the following months as COVID-19 restrictions ease.
The National Association of REALTORS® tracks the number of building permits issued by metro area every month and identifies the top 10 markets with the most and least single-family building permits issued within the last 12 months. The purpose of this blog series is to identify where housing construction is rising and where we need to address the issue of underbuilding at the local level.
At the national level, housing starts slowed down in April after reaching the highest level since 2006 in March. Nevertheless, we are currently building 24% more homes than we typically have built in April in the last couple of decades. Thus, housing construction is trending upward with housing starts likely to reach 1.6 million for all of 2021 and rise further to 1.7 million in 2022.
Along with housing starts, building permits are also a leading indicator of housing activity for the upcoming months at the local level. Specifically, building permits provide an estimate of the number of new housing units that have been authorized by the government. Specifically, in April, 46% of metro areas are issuing more single-family building permits than the historical average.
The current analysis includes data for 262 metropolitan areas across the country. Below are the areas with the most single-family building permits issued within the last 12 months ending in April (expect large metro areas to have the highest number of single-family permits due to larger population). While 10 to 12 months is the typical time that it takes to build a single-family home, more than 14,500 new single-family homes have already been added or they will be added soon to the market in the following months.
Areas with the most single-family building permits in absolute values (during May/2020 – April/2021):
We also identified the areas with the fastest/slowest growth of single-family permits. Since last year, the year-over-year comparisons may look much higher due to the “base effect,” we compare them with the 12-month average in the last 20 years of single-family building permits.
Areas with the fastest/slowest growth of single-family building permits:
In the areas below, the number of single-family building permits is more than twice the number of single-family building permits in the last 20 years.
Hover over the map below to see how many single-family building permits were issued in the last 12 months in 262 metro areas across the country.
Meanwhile, the job market continues to recover with 560,000 new jobs added to the market in April. While 7 million jobs are still needed to get us back to the pre-pandemic levels, layoffs are falling. Kansas, South Carolina, South Dakota, Vermont and Wyoming are reporting fewer layoffs compared to pre-pandemic. As more people return to the workplace, the demand for housing is more likely to increase as Americans set their sights on homeownership. This implies that the housing supply shortage may be aggravated even further in the following months due to strong demand.
In a balanced market, a single-family permit is issued for every two new jobs. This is the ratio for the Houston metro area. Specifically, during the last 12 months, 52,090 single-family permits were issued while the local economy added 120,900 new jobs. However, that’s not the case for Orlando area. In this area, 16,340 single-family permits were issued compared to 97,500 new jobs in the last 12 months. Overall, a single-family permit is issued for every 5 jobs in the top 10 areas with the most single-family permits showing that constructions should speed up even more.
Hover over the map to compare the number of single-family permits and new jobs that were created in the last 12 months in the following areas. The darker the color, the larger the housing shortage.