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WASHINGTON – September 21, 2016 – In 80 percent of measured U.S. metro areas, the number of new homes under construction falls short of demand based on the number of new jobs, according to a study conducted by the National Association of Realtors® (NAR).
In Florida, Miami ranked in the top 10 for large metro areas that need more homes built. At the other end of the spectrum, however, the Pensacola-Ferry Pass-Brent area of the handle is close to a balance between demand and construction. Overall, the 18 Florida metro areas included in NAR's study fell across a broad spectrum somewhere in the middle.
NAR's study looked at new home construction relative to job gains over a three-year period (2013-2015) in 171 metropolitan statistical areas (MSAs) throughout the U.S. According to NAR, "single-family construction is startlingly underperforming in most of the U.S."
"Inadequate single-family home construction since the Great Recession has had a detrimental impact on the housing market by accelerating price growth and making it very difficult for prospective buyers to find an affordable home – especially young adults," says Lawrence Yun, NAR chief economist. "Without the expected pick-up in building as job gains rose in recent years, new and existing inventory has shrunk, prices have shot up and affordability has eroded despite mortgage rates at or near historic lows."
For the study, NAR analyzed employment growth in relation to single-family housing starts. Historically, the average ratio for the annual change in total jobs to permits is 1.6 for single-family homes, but 80 percent of measured markets had a ratio above 1.6, which indicates inadequate new construction. Overall, the average ratio for areas examined was 3.4.
In Florida, only the Pensacola area was in balance with a ratio of 1.6, and no state metro area had more construction than needed.
Using each metro area's jobs-to-permits ratio, NAR then calculated the amount of permits needed in each metro area to balance the ratio back to its historical average of 1.6. The higher the number of permits required, the more severe the shortage and the higher the ratio.
While Trenton, N.J. had the highest ratio of 25.1 percent and demand for new construction, larger cities had higher demands for housing. In total number of permits needed to find balance, NAR found the following cities ranked at the top:
Florida metro areas by rank, ratio and total permits needed
7. Miami-Fort Lauderdale-West Palm Beach: 11.4 ratio, 118,937 permits needed
31. Port St. Lucie: 5.7 ratio, 6,012 permits
56. Tampa-St. Petersburg-Clearwater: 4.1 ratio, 39,034 permits
61. North Port-Sarasota-Bradenton: 4.0 ratio, 14,073 permits
63. Orlando-Kissimmee-Sanford: 4.0 ratio, 47,351 permits
65. Cape Coral-Fort Myers: 3.9 ratio, 13,609 permits
71. Gainesville: 3.7 ratio, 2,277 permits
75. Deltona-Daytona Beach-Ormond Beach (Volusia and Flagler counties): 3.5 ratio, 4,487 permits
81. Tallahassee: 3.3 ratio, 2,158 permits
96. Ocala: 2.8 ratio, 1,769 permits
97. Jacksonville: 2.7 ratio, 13,736 permits
113. Punta Gorda, 2.3 ratio, 702 permits
118. Naples-Immokalee-Marco Island: 2.2 ratio, 3,020 permits
122. Sebastian-Vero Beach: 2.1 ratio, 493 permits
124. Lakeland-Winter Haven: 2.0 ratio, 2,142 permits
127. Palm Bah-Melbourne-Titusville: 1.9 ratio, 974 permits
129. Crestview-Fort Walton Beach-Destin: 1.9 ratio, 731 permits
139. Pensacola-Ferry Pass-Brent: 1.6 ratio, 168 permits
According to Yun, most of the metro areas with a big need for increased construction have strong appetites for buying, home-price growth that outpaces incomes and common instances where homes sell very quickly. Their healthy job markets continue to attract an influx of potential homeowners, fueling the need for more housing.
"Although a few small cities with high ratios did not make the national rank for absolute permit shortages, their supply shortages are still meaningful at the local level and could become a bigger issue if job gains hold steady and the current pace of construction remains at its nearly non-existent level," adds Yun.
"The limited number of listings in several markets means that many available homes are receiving multiple offers and going under contract rather quickly," says NAR President Tom Salomone, broker-owner of Real Estate II Inc. in Coral Springs, Fla.
Looking ahead, Yun says there is good news: The ratio in many areas moved downward slightly in 2015 compared to 2014 as builders started to respond to local supply shortages. However, it'll likely be multiple years before inventory rebounds in many of the markets because homebuilders continue to face a plethora of hurdles, including permit delays, higher construction, regulatory and labor costs, difficulty finding skilled workers and the exhausting process many smaller builders go through to obtain financing.
© 2016 Florida Realtors®. All rights reserved. Reprinted with permission.