Buyer traffic is likely increasing so much because of the severe shortage of existing homes for sale. Realtors are reporting the lowest supply on record and are not expecting the situation to improve anytime soon. While housing starts did rise steadily throughout 2017, they did so very moderately and are still not close to historically normal levels of production.
As builders gear up going forward through the beginning months of 2018, anticipation of new heights in construction efforts this year is in the air, exactly what the industry needs given ongoing inventory constraints leftover from last year. Senior economist for Realtor.com, Joseph Kirchner, puts it plainly with, “December’s increase in construction labor is a hopeful reminder that things will eventually get better for our severely depleted housing market. In fact, if this trend gains momentum, it could address one of the largest issues holding back inventory – a lack of construction labor.” From an employment standpoint, experts like Curt Long, chief economist for the National Association of Federally Insured Credit Unions, attempts to shine light on the economic bright side stating, “The December jobs report was modestly positive, as employment gains were below expectations but still strong enough to keep the unemployment rate steady. Wage growth remains low, but did tick up slightly to 2.5%. Overall, the job market performed well in 2017 and is a key reason why the economy is poised for its best year since the crisis in 2018.” With more people employed, the housing market is aimed to flourish as well, but only so long as the underlying constraints of inventory and affordability are chipped away at.
Although a strengthening job market means an upswell in potential homebuyers, it remains true that current inventory levels cannot possibly support the housing demand at hand. To this point, Kirchner refers to the recent December jobs report that “shows no end in sight for the insatiable demand we’re seeing in the market. Jobs drive housing demand and with the unemployment rate remaining at its lowest level of the millenium, it’s only going to pick up.” Seemingly though, hope is on the way carried in the hands of builders as Fannie Mae chief economist, Doug Duncan, relays, “One bright spot we saw in the report is the biggest monthly rise in residential construction employment in 2017, raising hopes for some supply relief for housing this year.” Even further, according to a recent report from CNBC, “Confidence among the nation’s homebuilders jumped unexpectedly in December on expectations for a stronger economy. A monthly reading of homebuilder sentiment rose 5 points to 74. This is the highest reading since 1999.” Hopefully, the double-edged economic sword cutting through housing will soon be dulled by hammers and nails.