The latest report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau showed housing starts sank to an eight-month low.
Now, economists are saying that drop could intensify in the months ahead as building permits also saw a drop in May.
“Housing shortages look to intensify and may well turn into a housing emergency if the discrepancy between housing demand and housing supply widens further,” said Lawrence Yun, National Association of Realtors chief economist. “The falling housing starts and housing permits in May are befuddling given the lack of homes for sale and the quick pace of selling a newly-constructed homes.”
“Meanwhile, job creations of a consistent 2 million a year will push up housing demand further,” Yun said. “One thing that’s moving up is the housing costs for consumers: higher home prices and higher rents.”
And NAR wasn’t the only one alarmed by the survey’s results – another expert explained the importance of watching the market to see if the decrease is a new trend.
“We will need to watch carefully if this is a one-time anomaly or a multi-month trend,” said Scott Volling, PwC U.S. Engineering and Construction advisory director. “The industry is already facing an inventory shortage, which is driving up prices, so these results indicate the demand-supply gap could get worse and further impact affordability for certain segments and markets.”
One economist, who served as chief economist at Fannie Mae for more than 20 years, said the drop was surprising, and that the industry expected a modest increase of about 1.2 million units.
“The decline in starts is all the more surprising given high levels of homebuilder confidence and increases in new home sales, although there was a sharp drop in April,” Nationwide Chief Economist David Berson said. “Additionally, mortgage rates remain very low and mortgage credit availability, while much tighter than in last decade’s housing boom, has eased considerably in recent years.”