Home construction lagged behind job creation last year in nearly two-thirds of the 146 U.S. metro areas, according to analysis by the National Association of REALTORS® (N.A.R.). But the home-building industry’s largest trade association, the National Association of Home Builders (NAHB), and N.A.R. are at odds over whether supply or demand is to blame for lagging construction.
Making sense of the story
- N.A.R. Chief Economist Lawrence Yun says it’s a supply shortfall. He argues that builders “are just not robustly getting back into the game” by picking up their pace of construction.
- David Crowe, chief economist of the NAHB, counters that builders would churn out more houses if there was sufficient demand to warrant it.
- Crowe stated, “Supply is an issue; that is true. But the dominant issue still is demand. That’s the reason builders aren’t building more homes.”
- However, N.A.R. researchers determined that, since 1990, the 146 metro areas it studied generated an average of 1.2 new jobs for each residential building permit, and lately the ratios have skewed higher.
- N.A.R. found that, last year, job creation in 63 percent of those 146 metro areas exceeded the traditional 1.2 jobs-per-building-permit benchmark. On average, the entire group generated 2.4 jobs per building permit issued.
- Such high ratios usually indicate demand for housing outpacing supply growth, which in turn contributes to rising home prices and less-affordable housing overall, according to Yun.
- Crowe added it’s important to note that some people in newly created jobs might move into previously vacant, existing housing, such as foreclosed homes. Second, wage growth has lagged job creation of late, which affects the ability of people to afford a home.
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