Waiting for Supply to Catch Up to Demand
According to Pat Hamill, chief executive of Oakwood Homes, it will likely take several more years before builders have the capacity to fully meet demand. “We lost a lot of builders, lost of a lot of trade contractors. We lost a lot of people to other industries,” he said of the lingering impact of the 2007-2009 recession.
–“Home Prices Start to Heat Up“; The WSJ (5/12/2015)
With low inventory and surging homes prices in much of the country, you’d expect new construction to be booming nationally.
But it’s not.
According to the National Association of Home Builders, new single family home construction is up significantly from the 2011 trough, when just 431,000 new homes were built, to 648,000 new homes in 2014.
However, that’s still well below the peak of 1.7 million new homes that were built in 2005.
“Once Bitten Twice Shy”
The most common explanation cited is lack of capacity: the industry shed so many workers after the bust that it’s physically unable to build more.
At least for awhile.
Eventually, supply has a way of responding to demand, whether the item in question is widgets, high tech IPO’s, oil — or new homes.
I’d give it another 2-3 years . . .
P.S.: One other post-bust side effect: the builders who survived — at least the smaller, local ones — are much more conservative and defensive.
On tear-downs and major remodels that I’ve listed the last few years, those folks are conspicuously more disciplined and patient, waiting for price reductions and less Buyer traffic (often times, in vain).
See also, “Anyone Know a Good Welder?“
