Why We Have So Few Homes for Sale
Ted Leighty from the Home Builders Association spoke at SMDRA a couple of weeks ago. We learned from Ted that regulatory costs from a local level to a national level constitute 24.3% of the cost of a new SFR across the country. I bet this percentage is much higher in metro Denver. OUCH! I will highlight some other things Ted said here—
· Materials cost has increased costs by $24k in the last year as lumber prices keep rising (35% increase this year).
· The NAHB is pushing hard against the elimination of 1031 Exchanges as proposed by President Biden as this changes would have a draconian effect on home construction.
· In 2020 builders started a total of 11,420 new properties, an increase of 3.7% from 2019.
· Builders started 683 condos last year down 30% from 2019.
· Builders started 2,709 townhomes/duplexes last year up 1.4% from 2019.
· Builders started 8,034 detached homes last year up 9.1% from 2019.
· Last year builders sold a total of 11,984 properties, a drop of 2% from 2019.
· Builders sold 709 new condos, down 12.2% from 2019.
· Builders sold 3,132 townhomes/duplexes last year, up 13.1% from 2019.
· Builders sold 8,143 detached homes last year, down 3.8% from 2019.
From 1997-2006 home builders sold over 15,000 new housing units every year for 10 consecutive years and back in 1997 metro Denver’s population was about 1 million fewer people or about 30% less. This means we need to be building at least 20k new homes a year in light of our population growth. And from 2018-2020 we have been building 12,000 new homes a year. We need supply to increase by 67%.
This is another strong reason why we have so few existing homes for sale. Over the last 7 years, since 2014, builders have built and sold 70k new homes of all types. We need new housing sales and supply to nearly double and until this happens existing home supply will remain incredibly low and home prices will continue to increase rapidly.
Once I have seen new home sales exceed 20k a year for at least 3 years in a row then I will start worrying that Denver home prices might drop. But, I think I will see a Dodo Bird before this happens.