New Construction Numbers: 2016 vs. 2005

Some people have concerns that the pace of the housing recovery is unsustainable and we may be heading for another housing bubble. However, there is a difference between today’s market and the housing market in 2005.  Jonathan Smoke, the Chief Economist of realtor.com explains::

“The havoc during the last cycle was the result of building too many homes and of speculation fueled by loose credit. That’s the exact opposite of what we have today.”

Looking at the number of new single family housing starts over the last 30 years, we can see housing starts during the current recovery (2012-2016) are still far below historic averages.  They are considerably less than new homes built during the run-up to the housing bubble (2002-2006).

A single family housing start is defined as “the number of permits issued for construction of new single family housing units. Housing starts are an important economic indicator due to its extensive spill over benefits for the other sectors of the economy (retail, manufacturing, utilities).”

Real Estate Bottom Line

Today’s demand for housing actually calls for more new construction to be built – not less. A return to historic normal new built levels would be a good thing.