How Builders Can Make the Most of the Housing Shortage

You know the situation: There's a housing shortage, and new construction isn't boosting the supply enough — in large part due to soaring construction costs. The consequences are stunning:

• Underpermitting and underbuilding over the last decade have resulted in 2.3 million fewer single-family home permits.
• At the current rate of 1.3 million homes built annually, that represents two years of “lost” building.
• Homeowners are staying put, with most not planning to sell anytime soon.
• Housing stock is staying in service longer and quickly aging.

Homeowners who stay put add to the pain

According to the Zillow Group Consumer Housing Trends Report 2018, today’s typical seller lives in their home for 13 years before deciding to put it on the block, and they spend an average of seven months pondering the decision. And the older the seller — or the longer they’ve owned their home — the longer they think about it.

Selling clearly isn’t a decision many homeowners take lightly, so it’s probably not surprising that only 5 percent of homeowners plan to sell in the next year, and 63 percent have no plans to sell at all. This contributes to the scarcity of available homes for sale.

What can builders do? Rethink size and layouts

There’s an opportunity for builders to meet the housing demand, but it’s important to consider how some buyers are responding to the inventory shortage: They’re having smaller families or “doubling up” their households. Builders could adapt to these behavioral shifts by building smaller homes amid feature-rich neighborhoods or single-family homes that accommodate multiple generations.

Zillow Group strives to provide economic and consumer insights that help you make informed business decisions. For more information, visit Zillow Research or download the New Construction Consumer Housing Trends Report 2018.