The current market for selling existing homes is missing, while homebuilders are eager to fulfill high consumer demand. However, despite the strong demand, they seem hesitant. Recent data from the U.S. Census Bureau highlights the thriving new home market, which is in sharp contrast to the sluggish resale market. In May, the housing starts rate reached its highest level since April 2022, marking the highest rate since 2006.
In May, housing starts rose significantly, reaching a rate of 1.63 million, a 21.7% increase from April and a 5.7% increase from May 2022. Single-family housing starts were at 997,000, up 18.5% from April. Building permits for housing units in May were at a rate of 1.491 million, a 5.2% increase from April. Currently, there are 695,000 single-family units under construction and 994,000 multifamily units under construction, the highest level since 1973.
Homebuilders are finishing more single-family homes than starting, but beginning more multifamily units than finishing, due to varying opportunities and construction delays. Multifamily construction is thriving, with anticipated deliveries soon, while single-family construction deliveries will be more restrained. Existing home sales decline has limited impact on the sales market, as homebuilders hold a significant market share. However, there is still a need to meet overall housing demand. Cancellation rates are down, and incentives are provided to restricted homebuyers, but negotiations with existing homeowners are unlikely at present.
Builders face obstacles in constructing more homes, particularly single-family homes, due to zoning restrictions, building codes, opposition from local communities, and environmental regulations. This has resulted in a severe shortage of 6 million homes nationwide. Regional disparities are evident, with limited construction in the Northeast and West Coast compared to the Sunbelt’s suburbs and exurbs. State legislatures and coastal governors must implement reforms overriding local control to address housing crises. While progress has been made, more work is needed to ensure an adequate housing supply.
To tackle the housing crisis in California, efforts include permitting more affordable housing on commercially zoned land and reducing the impact of environmental regulations. However, construction progress has been sluggish, with only 500,000 units built in six years. Existing homeowners are reluctant to sell, underscoring the importance of maximizing productivity and targeting high-demand regions. Permit reforms and policy changes are a starting point, but further action is necessary to address the millions of new housing units needed.