At least relative to history:
The plunge during the housing bust is expected. What’s incredible is how it’s stayed since. Adjusted for population growth, new home construction is lower now than it was at the depths of every pre-2008 recession of the last 60 years. And a big trend of the last few decades is the rise of single-occupant homes. So, if anything, you’d think we’d need to be making more homes than the past.
What’s happening? I don’t know. But a few thoughts and possibilities:
1. The crush of the housing bust was too much for the construction industry to recover from. Small contractors went out of business, and those who stayed in business lost workers who found new lines of work. Housing demand can rebound faster than new firms can ramp up new construction.
2. The rise of urban living is harder for construction firms to meet with new supply because of land and zoning restrictions. This is especially likely in places like San Francisco and Seattle, where home prices have absolutely exploded.
3. Maybe new homes are higher quality than they used to be, so we don’t need to built as many new units because they last longer.
4. Maybe this is a permanent thing. Maybe living with your parents into your 30s is a new reality. Home prices have risen around the country over the last five years, but maybe the supply-demand balance is being fairly met in most places, and we don’t need as many new homes as we did in the past.
5. Or maybe this is a big opportunity, and new construction will eventually rebound to its previous trend. That’d be a boon not just for the industry, but the whole economy, which is heavily influenced by housing.
The truth is always some mix of various things, some of which conflict. And I’m certainly missing other drivers. In any case, new home construction is one of the most important industries that looks nothing like it has for most of history. That’s interesting.