Housing starts in March climbed 19.4 percent from February to 1.74 million units, the highest number since 2007 and the strongest month-on-month performance since 1990, Business Insider reported.
Economists surveyed by Bloomberg had forecast an average of 1.61 million starts for the month.
The leap from February to March was due, in part, to February’s storms that halted construction in parts of the country.
Mortgage rates near record lows, work-at-home emigrants from cities, and a record low 1.03 million homes for sale last month – only about a two-month supply – kept housing demand strong.
The median price of a U.S. single-family home jumped 10.4 percent in February, year on year, and 1.2 percent from January, the National Association of Realtors (NRA) said, the biggest 12-month price spike since 2006.
Manchester, NH, is currently the nation’s hottest real estate market, according to Realtor.com, where refugees from Boston, 50 miles south, are bidding up prices by $30,000 to $50,000 above their asking price, Coldwell Banker broker Jeff Nyhan told BI.
The median U.S. home price today is about $313,000, roughly 16 percent higher than a year ago, the NRA reported.
While a shortage of lumber and other materials is contributing to the scarcity of homes on the market, the shortage has been coming for years, according to the Federal Home Loan Mortgage Corporation (Freddie Mac).
The housing market never recovered to meet demand after the Great Recession, Sam Khater, Freddie Mac’s chief economist, told the Wall Street Journal.
“We should have almost four million more housing units if we had kept up with demand the last few years,” he said. “This is what you get when you underbuild for 10 years.”
The shortage of available homes is 52 percent greater now than in 2018, when the U.S. was more than 2.5 million units short, according to a Freddie Mac analysis.
Last year, 991,000 housing units began construction, the most since 2007.
However, builders would need to put up between 1.2 and 1.2 million annually to keep pace with long-term demand and even more to resolve the current shortage, Rob Dietz, chief economist at the National Association of Homebuilders, commented to the WSJ.
The gap is especially large for entry-level homes, making it harder for young families and moderate-income earners to enter the housing market, Khater said.
In 2020, builders put up just 65,000 homes under 1,400 square feet, Freddie Mac noted; in the late 1970s, more than 400,000 such houses were being built each year.
The pandemic’s economic shutdown holds a large share of responsibility for the mismatch.
In a usual recession, demand for new homes falls, and supplies rise. However, in 2020, high-income earners working from home were freed from tethers to their office towers and began buying larger homes farther from city centers.
At the same time, low- and moderate-income earners lost jobs, saw their work hours cut back, and felt the need to hunker in place and wait for better times.
TREND FORECAST: We maintain our forecast for consumer optimism to continue to rise as long as interest rates remain low and Washington and the Federal reserve pump in trillions to inflate the economy and equity markets.
As long as interest rates stay low, the areas where real estate prices have shot up will remain strong. And even when the equity markets crash, these sectors will not suffer sharp declines.
On the downside, the commercial sector will continue to weaken as more people spend more time working at home and less time commuting. Also, rising crime will push apartment and residential real estate prices lower in once high-flying urban cities.
