What’s wrong with the single-home construction market?

In this blog we’ve talked about how multi-family construction is expected to grow faster than single-home construction, possibly till 2020. Does it mean single home construction is in trouble? No, it is actually doing better and better, according to quarterly data from the US census bureau.

In line with the current positive construction industry trend, single family unit construction is growing year over year. In 2014 there were almost 5% more single family unit starts than in 2013. In 2015, there were over 9% more starts than in 2014.

And yet there are rumblings coming from the housing market. More and more news web sites are reporting low housing inventory, which in turn is slowing home buying. Is it because housing construction can’t keep up?

It wouldn’t seem so. Overall housing availability has been steady for several years now, as seen in this table from a 2016 release from the US Census Bureau News service. So what’s the problem?


In fact, it is a question of what kind of houses are available. Trulia, a real estate site, reports that the real pain point in housing inventory is with starter homes. Their inventory has dropped more than 40% since 2013 and starter home affordability is getting worse, with starter home buyers having to spend 5% to 6% more of their income to acquire a new home, compared to 2012.

Regardless of whether home inventory is really shrinking or not, the problem is that it has never been more challenging for first-time buyers. Hence, the bet by constructors that more affordable Multi-Family units are a more reliable sell. They have certainly proven to be recently.

The question that comes to mind is: why isn’t there a market answer to the need for super-economical, first-time-buyer single-family houses? A partial answer would be the growing interest in “tiny houses”. These are extremely compact and surprisingly well-equipped homes, often measuring less than 300 square feet. It is a fascinating category of building and we talk about it in this blog article. It is questionable however, whether people with long-term, family- raising plans would consider such an option.

So the question remains. Given technological advances and reduced materials pricing in construction, why isn’t anybody capitalizing on this need by offering extremely competitive full-size housing?

Perhaps, as the construction market continues to gather steam, the answer will appear.

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