Chart of the Day: US New Housing Supply 1968 – 2017

Here’s an interesting chart that showed up on my desk via Barry Ritholz’s blog. It’s a chart of new housing supply in the US over a fifty-year span of time, and you really can see how the US housing new construction market has not yet recovered from the ’08 recession and financial crisis.

Check it out:

Us Housing Supply

Ritholz quotes a Freddie Mac report about the graph:

Consider this: from 1968 to 2008, a span of 40 years, there was only one year in which fewer new housing units were built than in 2017 (Exhibit 1)—and this despite rising demand in a growing economy.

In a recent Insight, we examined the demand side of the housing market, focusing particularly on the experiences of young adults. Our research shows that housing costs have been the most significant factor preventing young adults from forming their own households as well as buying a house. Robust demand but weak supply has driven up housing prices rapidly, which in turn is acting as a force to balance demand against supply. Facing higher home prices and rents, many young people are doubling up in shared living arrangements or living at home with their parents.

Ritholz points to a shortage of labor and higher development costs as the key reasons for the low rates of construction, and argues that one reason why the housing and rental markets are so tight right now is that the US still have not caught up with average rates for new housing construction. At any rate, it’s some good macro context for the local housing market.

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8 Responses to Chart of the Day: US New Housing Supply 1968 – 2017

  1. Mike Sonn
    Mike Sonn December 21, 2018 at 11:39 am #

    Have more housing built per worker would help w/ the labor shortage issue. That’d mean not building SFHs but MF structures. That’d mean abolishing SFH zoning.

    St Paul 2040.

  2. commissar December 21, 2018 at 2:18 pm #

    well, also consider how there was a bubble of housing production and shady financing that led to the 2008 recession.

    • Adam Miller
      Adam Miller December 28, 2018 at 10:01 am #

      Kind of hard to see that in the chart, though. There’s a bit of an uptick in 2006-2008, but definitely not off the charts.

      Also, we’re certainly not in a new bubble now by this measure.

  3. Janne December 21, 2018 at 5:43 pm #

    And, this doesn’t control for population growth. I’d be curious how this would look if it were homes per hundred thousand households, or homes per hundred thousand people. I’m fairly sure it’d look even more dire.

  4. Mike December 22, 2018 at 11:07 pm #

    Need to see this new construction sitting atop the total housing stock.

  5. karen December 27, 2018 at 5:13 pm #

    And this chart is not even adjusted for population levels – the graph that shows building per capita shows that building now, after long recovery, is at bottom of previous normal recessions (like early 90s) levels.

    No chart on general U.S. economy trends should ever not be factored for population levels, especially for certain age groups.

    When population of home forming young adults went down with Gen Xers, we had housing bubble burst. As biggest bulge of millennials have been getting into their mid 20s, lo and behold, renting in cities became a big thing (remember Millenials are nearly as large as Boomers). In a few years biggest bulge of Millenials will be at peak home buying years, and don’t be surprised when apartments become less of thing, and suburban houses more of a thing again. I really think this will be a contributor to slacking of rent increases in cities in coming years.

    Builders have been simply responding to the level of demand there is, at prices they can build at. High labor and building costs are an issue, if we made it easier/faster to build, less parking requirements etc, developers could offer some more buildings at prices that would get demand

    But a big part of this is how much existing housing stock there was left over after housing bubble burst and great recession.

    Builders had to compete with existing houses that often were cheaper than even bare bones, new houses could be built for. because such a glut or existing houses.

    So what did builders build? What old houses couldn’t offee, new modern luxury, higher end homes and apartments.

    • Adam Miller
      Adam Miller December 28, 2018 at 10:03 am #

      I don’t know about housing versus renting as millennials age (we’ll have to wait and see) but the student debt levels of millenials is also not comparable to prior generations and that will likely continue to be a drag on their ability to buy.

      • Monte Castleman December 28, 2018 at 10:49 am #

        It also doesn’t help that there’s a severe shortage of single family detached starter homes. I’ve gone into the economic, zoning, and growth policy reasons for this before, but I think another reason is that there’s increasingly services and technology that allow the elderly to stay in their family homes longer. This is a good thing, but it does mean that there’s less turnover on the market.

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