Homebuilders Still Behind On Demand
Continued low mortgage rates and a good economy should keep housing demand strong this year. But homebuilders still won’t be able to meet buyer needs across the country in 2020, the industry’s top economists predict.
“We have had multiple years of low housing production,” said Robert Dietz, chief economist for the National Association of Home Builders. “There should be a lot more homebuilding taking place.”
The builders’ industry group is meeting in Las Vegas this week.
Dietz said a shortage of labor, rising building materials prices, land zoning hurdles and other issues have held back builders. Nationwide single-family building starts totaled just under 890,000 homes in 2019, according to the latest estimate from the builders’ industry. That’s well below the almost 1.4 million homes built in 2007 before the Great Recession. Deitz said builders in America should be producing more than 1 million houses a year but continue to fall short. For 2020, the builders’ association is forecasting about 920,000 starts. With reduced construction since the recession, Dietz said that the U.S. is short almost 1 million new homes compared with what would normally be built. “We need supply,” he said. “It’s just a question of whether the industry can provide it.”
Dallas-Fort Worth home construction rose to almost 36,000 starts last year, fueled by a fourth-quarter jump in new house sales. But that’s still more than a third fewer houses than the 50,000 homes North Texas builders were producing in 2006.
“I’m still forecasting around 37,000 starts for 2020,” said Paige Shipp of housing analyst Metrostudy Inc. “We did have a fantastic fourth quarter, but I don’t think we’ll get back to 50,000 starts for the foreseeable future. “Every year since 2012 — the first year since the recession that starts were increasing vs. decreasing — our year-over-year percentage growth has slowed,” Shipp said. “There is a direct correlation between rising home prices and slowing starts growth.” Shipp said that before the recession in 2005, median new home prices in D-FW were about $176,000. Today a midpriced new home in D-FW is close to $350,000. She says median home prices are flattening, which may indicate that builders are offering more affordably priced homes. “While I expect our shift to attainably priced homes to increase starts growth, our higher new home prices will prevent us from getting to 50,000 starts anytime soon.”
Despite building constraints, the housing outlook for 2020 is better than a year ago when mortgage costs were higher. “It’s entering the year with a great deal of momentum from 2019,” said Frank Nothaft, chief economist for CoreLogic. “We have low mortgage rates and employment growth and a low unemployment rate...
