Housing optimism high, but construction weakness hints at hurdles

Housing a buyer’s market this spring, summer?

Dolly Lenz Real Estate CEO Dolly Lenz and Dolly Lenz Real Estate Managing Director Jenny Lenz on the state of the housing market.

Many Americans – including both buyers and sellers – are optimistic about the housing market as the spring season begins.

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However, even lower mortgage rates and strong labor market conditions might not be enough to combat affordability challenges for some prospective buyers.

According to data from the Commerce Department, single-family housing starts fell 0.4 percent in March, to a seasonally-adjusted 785,000. That is the lowest rate since Sept. 2016, as noted by Robert Dietz, chief economist for the National Association of Homebuilders. Permits were also down to their lowest level since August 2017.

The problem is even worse in the West and Midwest, where single-family starts are down 21 percent and 20 percent, respectively, as noted by Dietz.

So far this year, single-family home construction is 5.3 percent lower when compared with the same period last year.


That means an inventory shortage that has been pushing prices higher, especially for low-to-moderately priced homes, is likely going to persist.

The number of homes priced at $200,000 and below in March was down 9 percent when compared with last year.

Experts told FOX Business they expect to see lower priced homes rise in price given there is  “very strong demand.” That means buyers will have to compete with one another for their ideal home.

The median home price recently crossed $300,000 for the first time.


The shortage of construction workers is getting worse also, adding to the industry's problems. Dietz previously told FOX Business that the labor situation continues to worsen, while regulatory hurdles will make it especially hard to add inventory in certain areas.

On the flip-side, price appreciation is expected to slow within the luxury market, where inventories rose 11 percent year over year.

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