Playing Catch-up: Putting the Recent Home Building “Boom” in Context
The number of homes listed for sale in America ticked down in October, marking the end of 2021’s modest inventory rebound that began in May and leaving current levels down by more than a third from pre-pandemic norms. But how did we get here? Why are there so few homes available to buy, even as homebuilders seem to currently be firing on all cylinders to develop and sell more homes?
More than 1.5 million residential building permits were issued between February 2020 and February 2021 — a benchmark level of housing construction surpassed in every building boom since the 1970s. The problem is that after permit activity bottomed out in 2009 at the depths of the housing crisis, it took more than 11 years to get back to that threshold. The new home construction market today very much remains in catch-up mode, recovering from a decline that was both much steeper and took longer to come out of than in any previous construction cycle.
Total residential permit activity has continued to grow dramatically throughout the past 18 months — hitting a new post-Great Recession peak of 1,687,300 permits issued in the 12 months from August 2020 through August 2021 — leading some to wonder if builders are actually creating a new glut of housing. But this year’s pace of homebuilding represents only the first full year of above-trend construction in 11-plus years, and in truth, builders are only just beginning to meet the housing deficit and feed housing demand that has only been growing since the end of the Great Recession.
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