NewsNew Home Construction Was Down in May, Despite Severe Housing Shortage

New Home Construction Was Down in May, Despite Severe Housing Shortage

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According to the most recent data from the Census, new home construction declined for the second month straight in May, significantly more than most economists expected. Mainstream projections expected 1.7 million housing starts for the month, but there were only 1.5 million, a 14.4% reduction from the 1.8 million housing starts in April. 

Newly issued building permits also fell more than most economists projected. Less than 1.7 million permits were issued in May, a slight decline from the 1.8 million issued in April. 

Housing completions, on the other hand, were a brighter spot. In May, completions were at a seasonally adjusted annual rate of 1,465,000, a 9.1 percent increase from the revised April estimate of 1,343,000. The May figures also represent a 9.3% annual increase.  

America’s housing shortage is quite severe, with one study estimating that the U.S. is short up to 6.8 million housing units. To make up for the shortage, America would have to build roughly 2 million housing units per year for at least a decade. 2 million housing units a year is a record level of construction. In May, there were only 1.5 million housing starts and 1.7 million permits issued, meaning the United States isn’t building enough homes to keep up with the level of demand. 

Why Building New Housing is a Challenge

Building new housing has become much more challenging since Spring 2020. Before the pandemic, it typically took about four to six and a half months to construct a new home, but now it takes over eight months, according to Robert Dietz, chief economist at the National Association of Home Builders (NAHB). 

The primary culprits of the slowdown are supply-chain disruptions and a depleted workforce. There are simply not enough workers and supplies to build the housing that America needs. “There’s a lack of lumber, appliances, cabinetry, electrical transformer equipment, land to build on, and workers,” Dietz said.

An NAHB survey of homebuilders across the country found that builders and contractors are pessimistic. More than 90% of builders reported shortages of necessary supplies, such as appliances, garage doors, plywood, lumber, and oriented strand board. The 90% figure represents the highest number since NAHB started conducting its survey in the 1990s. Similarly, 90% of homebuilders in the U.S. said that the number of available housing lots in their markets is low or very low. 

NAHB surveyed builders, asking them if they had a shortage of 23 different supplies. In June 2020, fewer than 40% of builders said they had a shortage of necessary supplies and materials. Starting in May 2021, the share of builders who said they had a shortage increased at least 27 percentage points (usually much more) for each of the individual 23 items.

Certain materials, such as oriented strand board, went from 9% to 92%, reporting a shortage. Even items such as appliances, which never had supply problems in the past, were rated by 95% of builders as lacking in supply. The housing shortage will remain until the United States fixes its supply shortage. 

Tyler Williams
Tyler Williams
Tyler graduated from Virginia Commonwealth University in 2017 with a Bachelor's degree in Urban and Regional Studies. Currently based in Los Angeles, he works as a freelance content writer and copywriter for companies in real estate, property management, and similar industries. Tyler's main professional passion is writing about critical issues affecting big and small cities alike, including housing affordability, homelessness, inequality, and transportation. When he isn't working, he usually plans his next road trip or explores new neighborhoods and hiking trails.

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