Fed Economist Forecasts Uptick in Single-Family Construction
The housing market may be headed straight for a post-pandemic downturn, but according to Jordan Rappaport, a senior economist at the Federal Reserve Bank of Kansas City, an uptick in single-family home building could soon follow. After decades of underbuilding and a recent shift to remote work, Rappaport predicts that national single-family permits could eventually rise to a long-term annual rate of 1.4 million, but a number of challenges remain for regional builders across the U.S., NAHB reports.
Rebounding construction could lead to supply constraints as well as exacerbate an existing shortage of skilled labor, construction materials, and ready-to-build lots, though long-term inventory growth is necessary to resolve an ever-widening housing affordability crisis.
Rappaport has issued a new study that finds that years of under-building, which has left a housing deficit estimated by NAHB at more than one million homes, coupled with a shift to hybrid work models and commuting mean an expansion for single-family construction is coming after the current downturn.
Given these benchmark assumptions, Rappaport predicts that reduced commuting times will eventually boost aggregate single-family permits in the 56 core-based statistical areas (CBSAs), with a population of at least one million in 2020, by 427,000 per year, increasing single-family construction in these CBSAs by 92% above its level in 2019 and increasing national single-family construction by 49% above its level in 2019.