A shortage in housing – caused by a drastic slowdown in homebuilding activity – has pushed up home values too much in some areas and made rents unusually high, according to the National Association of REALTORS®. Unless construction activity picks up soon, rising prices will make homes less affordable and rents too, NAR warns.
Homebuilding activity for all housing types is underperforming in about two-thirds of 146 metros measured and that has prompted a significant drop in available homes for sale, according to NAR.
“In addition to slow housing turnover and the diminishing supply of distressed properties, lagging new home construction — especially single family — has kept available inventory far below balanced levels,” says Lawrence Yun, NAR’s chief economist. “Our research shows that even as the labor market began to strengthen, homebuilding failed to keep up and is now contributing to the stronger price appreciation and eroding affordability currently seen throughout the U.S.”
NAR Report: New-Home Construction Is Trailing Job Growth
Adding to the housing shortage, millions of home owners are still underwater – meaning they still owe more on their mortgages than their home is currently worth. That will keep a significant number of properties off the market. Also, distressed property sales are down, currently comprising about 9 percent of the market, which is down significantly from 35 percent just a few years ago
“The demand for buying has drastically improved this year and is propelling home sales to a pace not seen since 2007,” says Yun. “As local job markets continue to expand, the pool of home buyers will only increase. That’s why it’s crucial for builders to begin shifting their focus from apartments to the purchase market and make up for lost time.”
The median sales price for a single-family home reached an all-time high in June at $236,400 – that’s higher than the previous record of $230,400 reached during the housing boom in July 2006, according to NAR. Renters are also being squeezed. Rental costs are up 4 percent nationwide, while incomes have only risen 2 percent.
“We are having a nationwide housing cost problem,” Yun told the Huffington Post in a recent interview.