Single-Family Home Construction Remains at Recessionary Levels


Graph from The Wall Street Journal.

Chris Kirkham reported in Saturday’s Wall Street Journal that, “U.S. unemployment is hovering near the lowest level in a decade, jobless claims have reached a 43-year low and home prices have surged to records. But in this eighth year of economic expansion, the number of single-family homes under construction remains at recessionary levels.

Housing starts dropped 18.7% in November to a seasonally adjusted annual rate of 1.090 million, the Commerce Department said Friday. Permits, an indication of how much construction is in the pipeline, were down a milder 4.7% to 1.201 million.”

The Journal article explained that, “Adjusting for population growth, single-family construction is barely back to the prior troughs of recessions in 1981 and 1991, according to research from mortgage giant Fannie Mae. Even October’s monthly readings, which showed single-family starts at the highest level in nine years, were more than 15% below long-run averages.

Sparse construction of new houses remains one of the enduring legacies of the housing bust and is one of the biggest impediments to achieving a more balanced recovery, economists said.”

Mr. Kirkham added that, “The industry’s inner workings broke down during the housing crash of the last decade and haven’t fully recovered. Builders have faced difficulties finding skilled construction labor, while financing has been difficult for smaller builders and land developers. What’s more, younger buyers remain on the sidelines, prompting builders to focus on a smaller group of upmarket buyers.”

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