All signs point to a house building boom as the number of building permits that were created this summer reached 1.69 million, well above the 1.5 million mark at which Zillow says indicates a boom.
The number of building permits issued gives the market an idea of how new home construction is coming along, and currently, the momentum that home builders are operating at is greatly helping the current supply shortage plaguing weary home seekers.
Even though the number of building permits is up, Zillow says the market is still behind on new homes dating back to the Great Recession in 2007.
"Builders in recent months have put the pedal to the metal to get new homes up and meet a rush of demand, and we just saw the first full year of above-average construction since the mid-2000s housing crash," says Zillow Senior Economist Jeff Tucker. "This isn't a new boom cycle of new construction so much as it's an attempt to get even from the last bust. There is still a long way to go to catch up from more than a decade of slow construction, and some markets have longer to go than others."
According to Zillow, when compared with the growth in population since 2008, there has been a shortfall of 1.35 million homes in the largest 35 metropolitan areas tracked by Zillow. While the number of permits have been about average in the past, at the rate builders are moving, they still have to build about 2.7 years worth of homes in addition to the ones they are currently building to meet demand.
But the number of new permits only tell some of the story. Builders themselves are experiencing their own problems ranging from labor problems to supply shortages to fluctuating prices which cause their own set of issues. All of these issues combined result in a decrease of 44.8% for permits that were pulled, yet remain unstarted.
“It's also not clear whether simply keeping up with the pace of prerecession construction is enough to meet current demand,” Zillow said. “The average household size is about as small as it has ever been—there are about 2.5 people per household now, compared to three people per household as recently as the mid-1970s—meaning more homes are needed as the population grows There are also millions of ‘missing’ households over the past 15 years: households headed by people who, historically, would be expected to have their own home by their current age but have been unable or unwilling to move out on their own. Those households need to be taken into account when considering how many homes to build.”
This is already being felt across the country as home prices surge. The pandemic has not helped the situation as more are able to work remotely and are seeking refuge in the suburbs, where a high-volume of new home growth occurs.
Breaking down the data, Dallas has had the biggest post-recession shortfall of single-family building permits, falling 167,093 homes behind the pre-2000 average. Miami (142,650), Phoenix (122,288), and Seattle (113,292) have also fallen behind by more than 100,000 homes.
Nine metros saw a surplus of new single-family construction by this same measure, including Chicago, Pittsburgh, and Detroit. These nine metros generally have seen modest population growth since 2008, and home value growth in all but Pittsburgh has lagged behind the national average during that time.
Click here to view the report in it’s entirety, including a breakdown for the metropolitan areas tracked by Zillow.