The dearth of housing inventory that has been making headlines can be largely attributed to a decline in home building following the housing crisis in 2008, according to recent data from Zillow. Had building continued at its historical pace, there would be 6.3 million more single-family homes today than there are, according to Zillow’s report titled, “They Don’t Build Them Like They Used to: The New Construction Shortage.”
Between 1985 and 2000, there were 3.9 single-family housing permits issued per 1,000 residents per year across the nation. Since 2008, that number has dropped to 1.9 permits per 1,000 residents.
“In nearly every major market today, single-family homes are being permitted at a lower rate than they were historically as builders face a number of challenges in adding new homes, including land and labor costs,” said Aaron Terrazas, Senior Economist at Zillow.
Among the 25 largest metros, eight have issued less than one single-family housing permit per 1,000 people over the past decade.
The greatest decline in housing permits has taken place in Las Vegas, where they fell from a historical norm of 14.4 permits per 1,000 residents to 3.2 permits per 1,000 residents over the past decade.
The only major metro to evade this pervasive trend was Houston. The current rate of housing permits is Houston is 4.9 permits per 1,000 residents, up from 3.6 per 1,000 in the past.
The highest rate of housing permits is taking place in Austin, Texas, where there are 5.3 permits per 1,000 residents, though this is down slightly from the historical norm of 6 permits per 1,000 residents.
One impact of low inventory, of course, is rising home prices. Zillow noted that the median home prices in more than half of the largest 35 metros have risen above their pre-recession peak.
Another impact, Zillow pointed out, is an aging of the housing inventory, which creates “a new set of challenges around home maintenance as the structures age.”
At the national level, homes sold in 2007 were an average of 24 years old. A decade later, the average age of a home sold was 37 years. Indianapolis experienced the most significant aging of housing inventory among the 35 largest metros, with the median age of homes sold rising from 21 years to 41 years.
Zillow rebuffed potential speculation that slowing population growth and migration patterns might account for the slowing in new housing permits. “The analysis shows that for the past 10 years, new permits per capita for just the increased population are also below historic norms and trending downward.” Also, the “deficit of new permits compared to historic norms” is present in 28 of the 35 largest metros.
However, the analysis did concede that some markets may be working off a surplus created during the housing boom between 2000 and 2008. During these years, housing permits were 17.4 percent higher than they had been the 15 years prior.
The good news is “construction rates have been steadily rising,” according to Zillow. In June new home sales were up 2.4 percent over the year, according to Zillow.