The answer is that housing industry growth is minimal because too few homes are for sale, and rising prices of homes in many markets have made home ownership financially out of reach for many families.
Lawrence Yun, chief economist at the National Association of REALTORS®, is predicting a 1 to 2 percent uptick in sales this year, to about 5.6 million units. "Given favorable demographic trends and how well the economy is doing, that increase is much more restrained than it could be. This is really about lack of inventory,” Yun said at a residential economic forum. "New construction is key to addressing inventory shortages, but small builders are largely absent from markets," Yun said.
Although unemployment percentages are shrinking and wages are rising, home prices have grown 48 percent nationally over the past 6-7 years while wage growth has increased only 15 percent. The persistent low inventories of homes for sale have been driving up home prices and making homes increasingly unaffordable for many households.
New construction is the best way to bring prices down, but the number of new homes coming on the market remains historically low. Small builders, who traditionally have built the bulk of housing in the country, are having trouble getting construction financing from the community banks, and their labor and material costs have increased. This is not a favorable situation since most new homes are being built by the large building companies who focus mainly on high-end homes.
We need more affordable homes that are more in line with people's wages.
So what are the solutions? Some of the suggestions brought forth by National Association of REALTORS® economics experts are:
- Provide relief to community banks so they can start making construction loans to small builders again.
- Remove tariffs on any products related to home construction, like lumber.
- Relax land use restrictions at the municipality level.
- Modify condominium defect laws, helping builders reduce their risk for small defects.
- Offer free training in welding, carpentry, and other construction trades for people displaced from other jobs to increase the labor force.
In spite of the challenges, buyers and buying, sellers are selling, and young people are pursuing the American Dream of homeownership. There will always be market challenges. If you are selling your home, you will likely receive a higher price for your home than you anticipated. If you are buying, you will likely pay more for your home than you would have paid last year.
If you have questions about buying or selling homes in Chicago or the greater Chicagoland area, contact us. We have been helping buyers and sellers achieve their goals in every imaginable market condition since 1945, and we would love to help you.