One of the defining characteristics of today’s housing market is the lack of available inventory, and much of this scarcity can be traced back to the lack of building following the bubble’s burst.
In the U.S., 3.9 permits for single-family homes were issued per 1,000 residents between 1985 and 2000. Since 2008, that mark stands at just 1.9 permits per 1,000 people.
If that historic rate had continued over the past decade, there would be about 6.3 million more single-family homes in the housing stock, according to an analysis by Zillow.
Since 2008, only Houston has kept up with its pre-bubble building pace, issuing more residential permits than there would have been at the historic rate. Riverside, in contrast, has dropped from 7.9 permits per 1000 residents to 1.5 over the past 10 years.
The permit pace in Las Vegas slowed the most, falling from 14.4 permits per 1,000 residents prior to the housing boom to just 3.2 permits for every 1,000 residents.
Inventory has been falling on an annual basis for the past 41 months, although its decline has slowed in recent months. With such limited inventory, competition for available homes has been particularly fierce in the nation’s hottest housing markets, driving up prices and making it more difficult for new buyers to enter the market. The median home value is higher than its pre-recession peak in more than half of the nation’s largest markets.
Another effect of fewer homes being built is that existing homes are getting older. The median age of homes that sold in 2007 was 24 years. By 2017, that had increased to 37 years, bringing a new set of challenges around home maintenance as the structures age.
In Indianapolis, the median age of a sold home increased from 21 years to 41 years, the biggest age increase among the 35 largest metros. In Los Angeles-Long Beach-Anaheim, the median home age has gone from 44 to 54 years. In Riversides County, it has gone from 18 to 30 years.
According to the Zillow analysis, it would take about five years of building at the current pace to add the “missing” homes.