By Andrea Riquier | MarketWatch
Stop us if you’ve heard this one: There isn’t enough inventory in the housing market.
It’s a well-worn refrain, but a new analysis from Trulia offers a conclusion so simple it seems silly. Too little fresh supply — new homes being built — is far and away the single biggest contributor to the meager level of housing inventory.
Anyone keeping tabs on the housing market is familiar with the low-construction theme. While the pace of new-home sales has perked up over the past few years, they still represent only about 69% of their long-run sales pace.
Trulia’s analysis suggests that in the largest 100 metros of the U.S., a one-percentage-point increase in home-building over the past five years — if builders had increased housing supply by 2% more homes rather than 1%, for example — would mean existing inventory would stand 13% higher in 2017 — in addition to the actual number of homes that were constructed.
“While I don’t fully buy into Trulia’s analysis that simply building more supply increases home sales, a significant shortage of entry-level new supply exists today. Builders, with the help of municipalities, must find a way to bring more of this supply to market.”
~ Jim Belfiore, Belfiore Real Estate Consultants
