New-home construction reached an important benchmark in February, according to Zillow, when more than 1.5 million residential building permits were issued over the prior 12 months. That level of activity indicates a housing boom that hasn’t been seen since August 2007.
This building boom has drawn comparisons to the glut during the Great Recession, but Zillow analysis indicates builders are only beginning to fill the hole of unmet demand.
“Builders in recent months have put the pedal to the metal to get new homes up and meet a rush of demand, and we just saw the first full year of above-average construction since the mid-2000s housing crash,” Zillow Senior Economist Jeff Tucker said in a release. “This isn’t a new boom cycle of new construction so much as it’s an attempt to get even from the last bust. There is still a long way to go to catch up from more than a decade of slow construction, and some markets have longer to go than others.”
Zillow estimates that since 2008, there has been a shortfall of 1.35 million homes in just the 35 largest metros. At the current pace of permitting, that shortfall is as if no homes at all were built for 2.7 years.
Although homes need to be built, builder activity has been hampered by supply chain disruptions and labor shortages. The completion of new home builds has stalled since the spring, and Zillow analysis shows an 8.4 percent dip since last year. The number of homes permitted, but not started, is up 44.8 percent from a year ago.
The shortage of homes in the most heavily populated markets have left home shoppers competing for a limited supply, increasing prices. Since the Great Recession, single-family residences have appreciated more than other types of homes, up 47.9 percent since January 2008.
According to Zillow, Dallas had the biggest post-recession shortfall of single-family building permits, falling 167,093 homes behind the pre-2000 average. Miami (-142,650), Phoenix (-122,288) and Seattle (-113,292) have also fallen behind.
Nine metros, most in the Midwest, have a surplus of new single-family construction: Chicago (+73,467), Pittsburgh (+47,254) Detroit (+46,990), St. Louis (+43,300), Cleveland (+35,210), New York (+31,634), Philadelphia (+16,949), Baltimore (+16,342), and Cincinnati (+5,183). These metros generally have seen modest population growth since 2008, and home value growth in all but Pittsburgh lagged behind the national average during that time.