Building more homes could help ease housing affordability concerns, but residential construction across the United States is still lacking, particularly in the West, Northeast and Midwest.
Those are the findings of the Federal Reserve Bank of St. Louis after tallying the number of U.S. homebuilding permits at just over 1.5 million. After demand waned during the financial crisis of 2007 to 2009, permitting increased until the pandemic in 2020. Still, the number of permits is short of pre-2007 levels of about 2 million.
The St. Louis Fed analysis shows the largest metropolitan areas with the lowest levels of building permits per capita are: Buffalo, New York; Providence, Rhode Island; Detroit; Cleveland; and Chicago. Among smaller metropolitan areas, the Modesto and Ventura, California, markets are severely underbuilt, the St. Louis Fed found, while building permits were at much more normal levels across most metropolitan areas in the Sun Belt states of Arizona, Florida and Texas.
From the Homes.com blog: Old House vs New House: Is it Better to Buy New Construction?
In May and June, housing affordability stood at the lowest point since 2006, the St. Louis Fed noted, citing a Federal Reserve Bank of Atlanta analysis. While the affordability measure has improved slightly in recent months, escalating values continue to price first-time buyers out of the market.
"One possible way to improve housing affordability is to increase the supply of housing," economist Victoria Gregory and research associate Kevin Bloodworth II of the St. Louis Fed wrote in a recent blog post. "The presence of low housing inventory, low vacancy rates and high demand for homes contributes to rising property values, which are signals that more homes need to be built."
About 1.5 million housing units a year are needed to keep up with demand, but builders are falling well short of that, creating a housing deficit, according to Ryan Marshall, CEO of homebuilding giant PulteGroup. In November, Marshall said municipalities and residents must be more accepting of development.
