New housing construction is booming, but due to market constraints, stalled projects are also up compared to pre-pandemic times.
In a new article written by Jacob Channel, LendingTree’s Senior Economic Analyst, he finds that strong housing demand has provided builders with plenty of opportunities to begin construction on new homes but labor shortages and global supply chain issues have made completing many construction projects difficult.
LendingTree gathered data for this report from the U.S. Census Bureau from 2019 and 2021 to examine how four homebuilding-related variables changed over that time. The variables LendingTree tracked were:
- The number of housing units authorized by building permits
- The number of authorized housing units that started construction (otherwise referred to as housing starts)
- The number of authorized housing units that didn’t start construction (stalled construction projects)
- The number of authorized housing units that completed construction (otherwise referred to as housing completions)
As a whole, LendingTree discovered that while the number of homes that were built increased from 2019 to 2021, home construction projects that were authorized but not started became far more prevalent.
Key findings were as follows according to LendingTree:
- Nationally, the number of housing units authorized by building permits increased by 25% from 2019 to 2021. The South saw the largest growth in units authorized by permits (27%), while the Northeast saw the smallest (19%).
- From 2019 to 2021, authorized housing units that started construction rose by 24% nationwide. Housing starts increased the most in the Midwest (27%) and the least in the Northeast (19%).
- The number of housing units that were authorized but didn’t start construction increased by 47% nationwide from 2019 to 2021. These increased most prominently in the Northeast, where they more than doubled. In the West, they rose by the least (19%). This growing number of stalled construction projects highlights how rising labor and raw material costs have negatively impacted builders.
- Though the number of completed housing units rose by 7% nationwide from 2019 to 2021, the number fell in the Northeast and West. In the Northeast and West, completed units fell by 9% and 2%, respectively. Conversely, the South and Midwest saw increases of 14% and 8%, respectively.
Looking forward, LendingTree does not expect much relief soon, as other factors are pressing down homebuilding. The pandemic, which many to believe to be over, will have continue to have residual effects on the market as it relates to labor, the supply chain, and demand. Raw material costs also remain higher than they were in 2019.
“Despite these difficulties, the news isn’t all bad for homebuilders. Even if rising mortgage rates weaken buyer demand and labor and supply issues persist, homebuilders will likely have plenty of opportunities to construct and sell new housing units as the year progresses,” Channel wrote. “And though the road ahead may be bumpy, that doesn’t mean it won’t ultimately be rewarding for many of those in the construction business.”
To view LendingTree’s research in its entirety, click here.