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What is going on with homebuilders?

NEW YORK – Nov. 25, 2015 – Lackluster homebuilding is hurting home buyers, writes National Association of Realtors® (NAR) Chief Economist Lawrence Yun in his latest column for Forbes. In October, housing starts totaled 1.06 million on a seasonally adjusted annualized rate – the lowest in seven months and below the level from a year ago. 
“What is going on with homebuilders?” Yun writes. “Housing starts refuse to rise in any meaningful way, despite the ongoing shortage in the number of homes on the market and falling rental vacancy rates. What is being built is getting quickly sold.”
A big negative consequence of sluggish homebuilding activity is that renters “are suffering and are having a hard time converting into ownership,” Yun writes.
In the past year, the share of first-time home buyers dropped to the lowest point since 1987 with only 32 percent of recent home buyers being first-time home owners. The historical average is around 40 percent.
As such, the homeownership rate has dipped to the lowest point in 50 years – 63.5 percent.
“The key reason for the falling homeownership rate is that homebuilders are not building enough,” Yun notes.
He says “massive” housing shortages have resulted in markets across the country. For example, in the San Francisco-Oakland region, 234,000 net new jobs have been created over the past three years but only 30,000 new housing units have been constructed – and most of that even have been apartments.
“Too little housing in relation to job creation has pushed up home prices too high too fast.” Yun writes. Home prices in San Francisco have climbed 52 percent over the past three years while incomes have not.
Nationwide, the slow pace of new home construction over the past three years has caused home prices to rise from anywhere by 20 percent to 25 percent, while the median national household income has grown by only 7 to 8 percent.
What’s more, rents have risen at the fastest pace in seven years and some places have seen double-digit rate increases due to housing shortages.
“The solution to the housing shortage is simply to build more homes,” Yun writes. “If homebuilders do not make headway, expect pitiful performance as more renters get shut out of what most Americans would view as the American Dream of middle-class life.
Source: “Lackluster Home Building Hurts First-Time Buyers,” Forbes (Nov. 18, 2015)
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Source: Florida Realtors Feed

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