The housing crunch, which has been driving up prices for the few houses on the market and leaving a whole lot of wannabe homeowners outbid and frustrated, is expected to get even worse this year. That’s according to the latest report on new construction in the U.S.
Builders applied for fewer permits to construct new homes in July—which is a pretty good indication that fewer residences will go up in the coming months. The 95,800 permits represented a 7.2% drop from a year ago and was down 16.3% from June, according to the U.S. Department of Commerce’s monthly new residential construction report.
Realtor.com® only looked at the report’s non-seasonally adjusted numbers, which weren’t smoothed out over a 12-month period to account for seasonal fluctuations.
“We aren’t building enough homes to keep up with population growth,” says realtor.com’s chief economist, Jonathan Smoke. “It means prices and rents will continue to go up at above average rates.”
Even with the low mortgage rates, builders are worried that demand could taper off “because of concerns about the economy and the presidential election,” Smoke says.
It isn’t just single-family homes that aren’t going up. Despite the dearth of affordable rentals on the market, the number of permits to put up multi-family dwellings (i.e. rentals, condos and co-ops), tumbled 6.9% from last year and 12.7% from June, according to the report.
Smoke blamed much of that decline on the expiration of a popular tax exemption, known as 421-a, in New York City that has led many local builders to put various projects on hold because they’ve suddenly gotten more expensive.
What is rising from the earth, be it single-family homes, condos, co-ops or rentals, is mostly luxury homes well out of the price range of most first-time buyers, he says. The high prices are due to high land, labor, materials costs as well as increased hurdles clearing regulatory barriers and securing financing.
The median price of a newly built home was $306,700 in June, according to the most recent data available from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development report. But the median price of an existing home was 23.8% less in June, at $247,700, according to the most recent National Association of Realtors® data.
It wasn’t all doom and gloom, though. Builders began construction on about 114,000 new homes, according to the not seasonally adjusted numbers in the Commerce report. That was a lift of 6.3% year over year and 3% from June.
The number of finished new homes hitting the market in July was up 1.6% annually to 87,7000, according to the report. But it was down nearly 9.9% from June.
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