New Construction Below Average for 14 Years Straight
Aside from the recent fluctuations in the real estate market, one of the reasons we continue to experience a housing inventory shortage actually dates back over the past 14 years.
New Construction Halts
The graph below helps tell the story of why there still aren’t enough homes on the market today. It uses data from the Census to show the number of single-family homes that were built in this country going all the way back to the 1970s.
The Story Behind Low Inventory
In the graph above, the blue bars represent the years leading up to the housing crisis in 2008. As the graph shows, right before the crash, homebuilding increased significantly. That’s because buyer demand was so high due to loose lending standards that enabled more people to qualify for a home loan.
The resulting oversupply of homes for sale led to prices dropping during the crash and some builders leaving the industry or closing their businesses altogether. That led to a long period of underbuilding of new homes, which now spans the past 14 years.
More new homes are being constructed this year and hopefully, this carries into the years ahead. However, this isn’t something that can be resolved overnight. It’ll take time to build enough homes to meet the deficit of underbuilding that took place over the past 14 years.
While we can't predict the future of the housing market or home inventory levels, it helps to understand the full picture of the housing shortage story that dates back in history.