In most parts of the country, a new home is hard to find. "The inventory of unsold new homes is at its lowest level in history," said David Crowe, chief economist for the National Association of Home Builders (NAHB). During the first two months of 2011, only an estimated 150,000 new homes were for sale nationwide, according to census data. In a "normal" economic recovery, this would be the moment when new-home construction surges. The U.S. population is still growing and those people need places to live. Usually, developers hire construction workers to build those homes, creating new jobs and solid economic growth. New-home construction has led the way in every economic recovery since World War II, according to the economists at Freddie Mac. However, things are different this time around.
Today, the millions of mortgages still at risk of foreclosure have put continued downward pressure on home prices, prompting many potential borrowers to put off buying a home until prices begin to rebound. The unfortunate result of the lack of sales is that workers aren't hired to build, housing demand declines and the recovery of the housing market and overall economy is stalled.
Last year, the sale of new homes broke a record in a bad way. On a non-seasonally-adjusted basis, only 305,000 new homes were sold in 2011, according to census data, the lowest level since the government started keeping track in 1963. Just to compare, new home sales peaked at about 1.3 million during the housing boom.
Pent up demand
The good news is that the U.S. population continues to grow, creating pent-up demand for new housing units that will eventually have to be built.