Eighty percent of U.S. metro areas are lacking in single-family home construction, and few areas are in greater need than Chicagoland, according to a new analysis from the National Association of Realtors.
Comparing home construction to job gains from 2013 through 2015, NAR found that among the 171 metro areas it studied, Chicagoland’s housing need is the fifth-worst in the nation, with 94,457 permits required to maintain the historical equilibrium of 1.6 jobs to every single-family permit.
Lawrence Yun, NAR’s chief economist, says this is a problem that has persisted since the downturn.
“Inadequate single-family home construction since the Great Recession has had a detrimental impact on the housing market by accelerating price growth and making it very difficult for prospective buyers to find an affordable home – especially young adults,” Yun said. “Without the expected pick-up in building as job gains rose in recent years, new and existing inventory has shrunk, prices have shot up and affordability has eroded, despite mortgage rates at or near historic lows.”
Here is NAR’s full top 10 list:
- New York (218,541 permits required)
- Dallas (132,482 permits required)
- San Francisco (127,412 permits required)
- Miami (118,937 permits required)
- Chicago (94,457 permits required)
- Atlanta (93,627 permits required)
- Seattle (73,135 permits required)
- San Jose (69,042 permits required)
- Denver (67,403 permits required)
- San Diego (55,825 permits required)
The New Construction Quagmire
Building shortages have long been a NAR talking point, and it is true that homebuilding is still below its historical averages.
However, NAR tends to gloss over some of the most inconvenient truths of housing and homebuilding in its analysis, including: the fact that building a home is more expensive now than ever, what with the costs of lumber, labor and other expenses rising; the fact that “A” lots in most metro areas are in short supply, and builders have resorted to either pricey, in-fill lots, or exurban developments that few Millennials are interested in; and the fact that because of those various market forces, starter homes within new construction are increasingly rare (which does not sit well with the stagnant incomes so many consumers are living with).
So although construction must increase, it is not a simple matter of snapping one’s fingers and making the permits appear.