While home values have recovered since the recession – and in many cases surpassed their pre-recession peaks – single-family home construction activity has continued to languish.
The rate of new housing starts will likely remain below historic averages until 2022 or later, according to a panel of economists and real estate experts.
The for-sale market has experienced persistently low inventory over the past few years. A continued low rate of new construction would likely keep demand high for the relatively limited single-family homes that are available and keep many in the rental market for longer, putting price pressure on both the for-sale and rental-housing markets.
The Zillow Home Price Expectations Survey, sponsored by Zillow and conducted quarterly by Pulsenomics LLC, asks more than 100 economists, investment strategists and real estate experts for their predictions about the U.S. housing market. The third-quarter survey also asked panelists about their expectations for new construction activity.
Historically, single-family housing starts have averaged more than 1 million units a month and reached heights of more than 1.8 million in 2006 before plummeting during the Great Recession. Activity has picked back up since then, but has yet to again reach the historic average.
A slight majority of panelists expect the level of new single-family construction will remain below 1 million units until 2022 or later, with the most pessimistic projections pushing this off until 2029.
One in five think that threshold will be reached by the end of next year, and a quarter are targeting 2021.
Zillow research indicates that the rate of U.S. home construction has lagged behind what typically would be expected given the rate of population growth over the past decade.
Issues such as scarce land, a worker shortage and high costs for permits and materials have plagued builders in recent years, making it increasingly difficult to profitably build large numbers of homes – especially at price points accessible to low- and middle-income home buyers.