ZILLOW reveals the TRUTH about slow U.S. home construction
U.S. new-home construction is arguably 2.3 million homes behind. Where did that number come from? Jared Frey, an applied scientist with Zillow Research, estimates in a recent report, “If permits were issued at historic rates over the past decade, accounting for population change, the country would have had 2.3 million more single-family home permits” than are presently out in the field today. The result, Frey said, is “U.S. housing stock is staying in service longer and getting older faster.
Why is Permitting So Low?
There are a number of factors playing into the shortage of new-construction permits in today’s housing market. The most common culprits tend to be the cost of labor and the cost of materials. The producer price for steel mill products, for example, has risen nearly 20 percent over the past year, and lumber and plywood posted similar gains earlier this year, although by the end of the summer many of those cost measures had fallen again.
Many blame new tariffs on construction materials for these rising costs, although Marc Padgett, president of a general contracting company in Jacksonville, Florida, recently went on the record saying this type of rhetoric is preemptive at best. “Lately we have seen a few knee-jerk reactions from manufacturers claiming upcoming price increases due to tariffs,” he observed. “Often, they can’t substantiate the claim because there isn’t an actual tariff, just the mention there could be one.”
The bigger issue, many believe, is that there simply are not enough skilled laborers to put those construction materials to good use. Jobseekers with construction experience are in short supply, and four in five respondents to a survey conducted on behalf of the National Association of Home Builders (NAHB) indicated they are “having trouble filling at least one type of hourly craft position.” Interestingly, participation in that annual survey jumped by 40 percent this year, indicating, the NAHB said, that more firms are having trouble filling jobs.
Frey posited that the eight years prior to the Great Recession, which posted 17.4 percent higher permitting than historic norms, might have created a backlog in the system. However, those numbers do not work when applied regionally, since, he wrote, “many major metros actually issued permits at lower-than-historic rates during the housing bubble.” Those metro areas included New York, Los Angeles, Philadelphia, Washington D.C., Miami, Boston, San Francisco, Seattle, and San Diego. “They never experienced a building boom, compared to construction rates of the past,” he noted, adding “demolitions and vacancies” have also hurt local housing stocks and pushed existing homes “into longer service.”
Do you think the construction shortage can be solved? How?