The housing inventory shortage has been pushing up prices, but also holding back home sales. In nearly every market, 20% more inventory means 20% more home sales. Today’s news on the new home construction surge is therefore highly welcome, especially in light of major challenges on material costs and soaring lumber prices.
The March figure of 1.74 million housing starts is the highest in 14 years. Both single-family units and multifamily units ramped up. After 13 straight years of underproduction – the chief cause for today’s inventory shortage – this construction boom needs to last for at least three years to make up for the past shortfall. As trade-up buyers purchase newly constructed homes, their prior homes will show up in MLSs, and hence, more choices for consumers. Housing starts to housing completion could be 4 to 8 months, so be patient with the improvement to inventory. In the meantime, construction workers deserve cheers.