In the midst of America's housing supply crisis, recent data reveals both promising developments and enduring challenges. A surge in homebuilding offers a glimmer of hope, yet industry experts caution that significant hurdles persist.
According to government data, construction of new homes surged by 10.7% in February, marking the largest increase since May. Single-family starts reached a two-year high, while multifamily home starts rebounded by 8.3% after a slump in January.
Despite these gains, Eddy Perez, founder and CEO of Equity Prime Wholesale Mortgage (EPM), underscores the pressing need for sustained efforts to address the inventory shortfall. Perez highlights the regulatory obstacles and lack of incentives for builders as key factors hindering construction.
"We need to find ways to give incentives to builders to build... there's not enough new homes, and/or they're not affordable," Perez emphasized.
Moreover, Perez predicts that the effects of current efforts may not be fully realized until 2026-27, emphasizing the long timeline involved in bringing new housing units to market.
Another significant barrier to new listings is the reluctance of homeowners to sell due to historically low mortgage rates secured during the COVID-19 pandemic. Many homeowners opt to retain their properties as investments rather than face higher borrowing costs for a new home.
"The reality is, if they sold their house... go buy another house, it would cost them more because there's been inflation there," Perez explained.
Looking ahead, the National Association of Home Builders (NAHB) expresses guarded optimism for the remainder of 2024. Chief economist Robert Dietz anticipates an upturn in single-family starts by 5-6%, marking a potential turning point after two years of sluggish growth.
However, the outlook for multifamily starts appears less sanguine, with apartment construction expected to decline by approximately 20% due to financing constraints and oversupply in certain markets.
Ultimately, the trajectory of the housing market hinges on various factors, including Federal Reserve policy. While expectations for interest rate reductions loom, the Fed's cautious approach underscores the complexity of navigating economic uncertainties.
As America grapples with its housing supply crisis, stakeholders remain vigilant, seeking innovative solutions to address the challenges and opportunities shaping the nation's real estate landscape.