Why hasn’t the inventory shortage fueled more home construction?

Construction_HousingShortage_Chart

Ever wondered why, in the face of a sharp inventory shortage, new home construction still lags so far behind other housing indicators?

Two reasons, according to Trulia Chief Economist Jed Kolko:

1) Because, despite a supply shortage, the vacancy rate remains elevated, thanks to a glut of unlisted vacant properties, many of them foreclosures.

The market does not have a housing shortage, just a shortage of for-sale listings.

“Many of those vacant, off-market homes could come onto the market, especially if their owners are just waiting for prices to rise enough to make selling worthwhile,” Kolko wrote in a blog post.

2) Because household formation, which fuels demand, is only half its normal rate.

“The big reason why this is happening is that the share of employed young adults is still closer to recession levels than to normal,” Kolko wrote. “In total, we estimate there are 2.4 million ‘missing households’ – people of all ages who should be heading up their own households but are instead living with parents, roommates or others.”
Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: