March has seen the biggest gains in single family home prices since May 2014. A 7 percent increase in home values over the last 12 months has been attributed to many factors. The hardest hit by these increases are the entry level buyers. New home construction is also being affected by this increase and might even be a factor in driving prices higher.
According to recent studies, about half of the nations largest housing markets are now considered overvalued. One of the biggest reasons for this is a combination of population growth and a lack of housing inventory in the neighborhoods people want to live in. Some may fear this is the start of another housing bubble. However the general consensus in the industry is that the overvalued markets will see price growth slow in the coming year.
Construction jobs, or more accurately the lack of people to fill the construction jobs, is one reason the housing inventory is low. You can’t discount rising interest rates totally but those have been slow and for the most part expected. The unemployment rate within the industry shows the unfilled positions were 7.4% in March. That is significantly higher than the national rate of 4.1%.
According to a recent study done by NAHB, there were 250,000 unfilled construction jobs at the start of the year. That puts the industry in a difficult position at the start of the spring construction season. Right now they are facing rising housing demands at the same time the residential construction industry is lacking workers.
Of course all this demand for housing is a sign of a strong and growing economy. These growing pains will be a challenge for builders forcing them to find ways of being more efficient. And with the stock of housing under construction rising 0.3 percent to 1.125 million, the highest level since July 2007. And single-family units under construction climbing 0.2 percent the highest level since June 2008, things are looking up.
Now is the Time
Did you hear that!? It was the starting gun of the construction season. If you are planning on building, now is the time to pull the trigger. With existing housing stock in desirable areas low and prices high, it has never been a better time to build. Some areas are not experiencing as much of a labor shortage as others. With builders eager and ready to go this is the time to get them working on your new home.