From 2012 to 2019, builders constructed 5.9 million homes — far fewer than what’s needed for the 9.8 million households created during the same time period.

Despite healthy economic growth and homebuilder confidence reaching its highest level since 1999, inventory levels are still woefully behind, according to a report released Tuesday by realtor.com.

From 2012 to 2019, builders constructed 5.9 million new single family homes, which represents an eight-year average of 6.2 housing starts per 1,000 households. Although builders began ramping up activity towards the end of the decade (7.3 starts per 1,000 households in 2019), it still isn’t enough to house the 9.8 million new households created since 2012.

Javier Vivas

“Simply put, new home starts are not keeping pace with demand. Homebuilders have a mountain of opportunity, but a big hill to climb,” said realtor.com Director of Economic Research Javier Vivas in a press release. “The current inventory crisis and the need for 3.9 million new homes means a nearly insatiable appetite from potential buyers, especially in the lower end of the market.”

The majority of homebuilders’ efforts have been placed at the luxury end of the market, where potential returns on investment are highest. While this benefits buyers with larger budgets, others who are looking for starter homes and homeowners who are considering upgrading are negatively impacted by a lack of new, available inventory.

In addition to a lack of new inventory, realtor.com noted that baby boomers are deciding to age in place — keeping a sizable share of existing inventory off the market as home price growth continues its seven-year climb.

Despite years of setbacks, realtor.com said 2020 might be the year that housing starts finally begin to match demand, especially as a new crop of buyers are waiting to take advantage of historically-low interest rates.

“Large populations of renters and well-qualified potential buyers with strong incomes are waiting in the wings,” Vivas said. “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,” he added. “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 home builders could represent a bright spot for housing in the decade ahead.”

Email Marian McPherson

Are you ready for what the industry holds in 2020? Inman Connect New York is your key to unlocking opportunity in a changing market. At Connect you will gain insight into the future, discover new strategies and network with real estate’s best and brightest to accelerate your business. Create your 2020 success story at Inman Connect New York, January 28-31, 2020.

Agenda | Speakers | Past Connect Videos

Thinking of bringing your team? There are special onsite perks and discounts when you buy tickets together. Contact us to find out more.

 

Show Comments Hide Comments
Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Success!
Thank you for subscribing to Morning Headlines.
Back to top
×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription
×