A decades-old housing shortage has left the U.S. with too few homes to satisfy the booming housing demand that became commonplace throughout the COVID-19 pandemic, but as builders ramp up construction, buyers are pulling back. A supply and demand imbalance has flipped on its head, and as mortgage rates climb higher and home prices break new records, no amount of new inventory seems to be enough to keep buyers in the game.
Rather than forging ahead with new homes that won’t sell, many developers are slowing their pace of production and dropping their prices on completed units, but a slowdown in home building could prolong an existing shortage years into the future, The New York Times reports.
“This is going to have a significant impact on future supply,” said Randall Lewis, a principal at the family-owned Lewis Group of Companies, a developer of master planned communities in California and Nevada. Mr. Lewis’s company takes raw land and over the course of decades adds basic infrastructure like sewers, streets and traffic signals. When companies like his pull back, the number of lots homebuilders can use in the future declines.
“We are now saying we’re going to look project by project and say which ones are we are going to go ahead on and which we are going to take a pause on,” he said. “As a developer, the question is, how much money do you want to put in the dirt when you don’t know what the future is going to hold?”