A recent study by the National Association of Realtors (NAR) reported that the construction of new homes is lagging behind the job growth of nearly two-thirds of metro area in the United States. With more people moving into these areas, the lack of new home construction is causing a housing shortage, which is bad news for buyers.
The NAR study analyzed the job creation of 146 metro areas across the nation, and compared them to single-family and multifamily housing statistics. They found that most of these areas suffered from slow housing turnover, diminishing supply of houses, and lagging construction. This creates an imbalance in the housing market, which is a major contributes to higher prices.
“Affordability issues for buying and renting because of low supply are already well–known in many of the country’s largest metro areas, including San Francisco, San Diego, and New York,” says Lawrence Yun, chief economist at NAR.
NAR’s study showed that the markets with the largest inconsistency of jobs and home construction are in areas where the economy is the strongest. This includes places such as San Jose, San Francisco, San Diego, New York, and Miami. In areas where job growth is slower, the effects are much less.
According to Consumer Affairs, home construction slowed down after the housing market started to fail in 2006. Those builders who did not go bankrupt as a result of the crash greatly slowed their construction activities. Despite the gradual recovery of the market, construction is still lagging years after the crash.
Yun says that unless construction activity picks up soon, rising prices will make homes even less affordable. Along with a down payment, home buyers must also have funds to cover closing costs and pay for points. Due to the volatility of the housing market, experts suggest that buyers avoid making major purchases that may deplete your available funds before purchasing a home.