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More housing construction is usually a good sign that there will be more housing inventory available for buyers. But does the increase in building permits and housing starts necessarily mean a surge in inventory in Washington State and the country as a whole?
According to a recent report published by the National Association of Home Builders (NAHB), there has been a recent increase in new housing construction nationwide. Could this mean we could see a much-needed uptick in new-home construction in 2022 and beyond?.
This trend is keeping pace with what we are currently seeing across the entire nation, though builder confidence hasn’t changed since the same time last year.
Across the US, new home construction increased in December 2021 by 1.4%, according to the Department of Housing and Urban Development and Census Bureau. That rounds off a year in which relatively low mortgage rates and a strenghtening labor market played a key role in the housing industry.
A lot of this growth has been seen in the western half of the U.S., including Washington State.
In the state of Washington, the rise of housing construction could be a good sign for the state’s housing market, particularly as it relates to inventory. Real estate markets across Washington have suffered from ongoing inventory shortages in recent years. There just aren’t enough homes listed for sale to satisfy the demand from buyers. Things are tight for renters, as well.
That said, the inventory in Washington State is still extremely tight compared to what a balanced market would look like. Right now, there is a little over 1-month worth of housing inventory in Washington State, which is far lower than a balanced market of 5 to 6-month’s worth.
NAHB has also reported an increase in the number of permits for multi-family home construction. These are units that house more than one family or owner, like duplexes and triplexes.
The NAHB conducts a survey every month, which it has been doing for 30 years. The NAHB/Wells Fargo Housing Market Index measures builder forecasts of single-family home sales as well as sales expectations over the next six months. Combined single-family and multi-family starts are 16.9% higher in the West, which shows that builders perceive the situation more positively.
Of course, there can be a lengthy lag time between the issuing of a building permit and the completion of the construction project. So the recent uptick in permits might not make an impact on Washington’s tight housing markets for some time. But it’s good to see there might be some relief down the road.
Our current issues with housing inventory can be traced back to the housing and economic crisis that began in 2008. Across the U.S., new-home construction slowed considerably during and following the Great Recession. And while the industry has ramped back up since then, there is still a shortage of available homes in many areas.
This has led to a kind of “limbo” situation in many real estate markets, including those in Washington State. Homeowners who are otherwise ready to sell are reluctant to list their homes, out of fear that they won’t be able to find anything else to buy. This makes it harder for buyers to find a suitable property.
Housing inventory is particularly tight in the Seattle metro area. As of February 2022, the real estate markets in Seattle, Tacoma and Bellevue all had less than a 1-month supply of homes for sale. That’s well below what is considered to be a normal or “balanced” market.
Related: Tacoma housing outlook for 2022
So any signs that there might be more inventory coming onto the market in Washington’s real estate markets could be seen as good news — especially for those planning to buy a home in the near future.
According to recently-released figures from Northwest MLS indicate that housing inventory at the end of December 2021 was 0.43-month supply, down from 0.53-month supply, marking a 24.5% decrease from December 2020. This includes single-family homes and condos in all the 26 counties in the MLS service area of Washington.
According to their most recent report, there were 3,240 active listings across the region at the end of December. That’s a decrease from 4,739 active listings over the same time last year.
King County, Washington has seen a marked drop in supply of homes. Along with rapid price appreciation, inventory continues to get squeezed tighter and tighter in this County. There is a very high demand for housing, which continues to struggle to keep up.
So it seems as though despite there being a healthy amount of housing construction, there are still parts of the State of Washington that continue to experience a tight shortage of housing inventory, especially in places like King County.
Sammamish Mortgage is a local, family-owned company based in Bellevue, Washington. We serve the entire state, as well as the broader Pacific Northwest region including Oregon, Idaho, and Colotrado. We have been providing a wide range of mortgage programs since 1992. Please contact us if you have mortgage-related questions.
Whether you’re buying a home or ready to refinance, our professionals can help.
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No Obligation and transparency 24/7. Instantly compare live rates and costs from our network of lenders across the country. Real-time accurate rates and closing costs for a variety of loan programs custom to your specific situation.