The acute shortage of homes in the US is no secret and increasing demand from buyers has put unprecedented pressure on the market over the last 18 months. Building more properties is an obvious solution to the problem, but the US new-home market has so far failed to keep up with demand. In addition, the sector faces its particular challenges moving forward.
The recent International Builders Show held in Orlando addressed the obstacles facing home building in the US and made predictions for the industry this year. Analysts generally expect more production in 2022 and higher prices, with Florida needing the most new homes.
Higher production this year
The National Association of Home Builders (NAHB) expects a rise in the construction of new single-family homes this year, albeit a modest one. Their figures predict a 1% increase in 2022 with the addition of 1.13 million units to the housing stock. Multi-family homes will see a more significant increase and production should go up by 6.3%.
NAHB Chief Economist, Robert Dietz, points out that the rise is considerably ahead of 2019. “Production will still be 26% higher than in 2019,” he said.
Between the two property types, the US new-home market should see an overall increase of 2.5% in production this year.
Sales will increase in tandem with the uptick in production. NAHB forecasts that they will rise by 9.3% compared to 2021 and reach 830,000 units in 2022.
Prices to continue to rise
House prices in the US have experienced some of their most robust growth ever over the last year, with the national average reaching almost 20%. On the back of continued high demand, 2022 promises to bring more price hikes. However, economists present at the Orlando show differed on how much the increase would be.
NAHB forecasts an average 5% increase in prices for the US new-home market, while CoreLogic predicted a lower rise of around 3.5%, based on moderation in demand. On the other hand, one economist believes that excess demand will continue and lead to a 9-10% increase in house prices.
Florida needs more new homes
Economists at the International Builders Show concurred on one aspect of the market: build where the buyers are. Frank Nothaft, Chief Economist at CoreLogic, pointed out that new homes are needed where population growth is highest.
Florida saw the highest net growth in 2020-21 along with Texas. The two states were the only ones to register a six-figure increase over the two years. Florida’s population grew by 310,000 people and Texas’ by 211,000.
Within the first-time buyer market (those aged 20-29), several states are forecast to experience high growth by 2030. Idaho will see the biggest increase (15%), followed by Utah (10%), Florida (9%) and Arizona and Texas (both with 8%)
Biggest challenges to US new-home market this year
2021 saw a year of two major headaches for builders in the US: a shortage of supplies and a lack of qualified labour. Both are set to continue this year.
According to Dietz, building material costs have risen by 21% in the year. “Their price and availability remain the most urgent challenge for builders,” he said.
Labour shortage in the construction industry is another obstacle facing home construction. NAHB figures point to the need for another 740,000 workers to keep pace with growth in the industry. In December alone, there were more than 300,000 job openings in the sector.
(Source: Florida Realtors)
