Home Construction Slumps Amidst Housing Shortage Crisis in US
In March, the number of new house starts in the United States dropped considerably, marking the lowest level since August 2023. This drop exacerbates the existing housing shortage, with efforts to bridge the gap hindered by various challenges, including regulatory hurdles and financial burdens on both builders and homebuyers.
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Continuously Decreasing New Home Construction
Based on the government's announcement on Tuesday, Apr. 16, the number of housing starts dropped from 1.55 million in February to 1.32 million annually. As mentioned, if development began at the same rate each month as it did in March, then that is the number of homes that would be constructed over a complete year. For the first time since April 2020, when the number of starts decreased by 26%, the reduction in March was the most significant.
The number of new house starts dropped by the greatest since February 2015, excluding the epidemic. There has been a discernible downward trend in new construction projects in recent months. As of March, the number of new housing starts was at its lowest since August 2023.
The results indicated a decline greater than the 1.48 million that Wall Street had anticipated. Accordingly, new construction declined nationwide, with the Northeast experiencing the most significant decline. In March, the only region that showed a rise in new buildings was the Western region. Permits for single-family dwellings also decreased by 5.7%, while permits for apartments remained unchanged.
Moreover, as an existing housing deficit results from demand exceeding supply, the decline in new home construction is an additional setback for the housing market. According to the National Association of Home Builders (NAHB), the United States lacks approximately 1.5 million housing units. Rob Bowman, the creator of Charter Homes & Neighborhoods, which is situated in Pennsylvania, stated that even though the United States lacks more than a million homes, efforts are being made to bridge the gap. However, he believes Americans are not yet doing enough to address the housing shortage.
In addition to the challenges that the builder is encountering, such as the expense of obtaining approvals and developing lots, Bowman pointed out that the expenditures that homebuyers incur, such as mortgage rates, insurance premiums, and real estate taxes, contribute to challenges.
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Effect of the Pandemic on the Housing Crisis
Housing issues have existed for decades, and one reason is that individuals do not have measurements to quantify them. Research has demonstrated that throughout the last four decades, the housing supply has yet to keep up with the demand for housing, leading to a shortfall of between two million and six million dwellings. Nevertheless, in the United States of America, attempts to construct additional homes are often thwarted by a mix of unreasonable homeowners and antiquated zoning regulations.
Moreover, in response to the pandemic caused by the COVID-19 virus, the federal government provided temporary aid with mortgages and rentals and passed moratoriums on evictions and foreclosures. This allowed some people some temporary relief. At a time when job and income losses were at their peak, the provision of financial aid and moratoriums were designed to work together to prevent the loss of housing resources.
However, the moratoriums have been lifted for quite some time, and federal aid resources have largely ceased. As a result, municipalities and counties in the United States are now confronted with a housing policy challenge that needs to be more data-driven and leave the housing stability of homeowners and renters in the hands of local politicians.
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