Construction experts explain No. 1 factor to growth in new home starts

Industry professionals converged in Addison, Texas, a suburb north of Dallas, to hear the latest in new construction lending at the Ground Up: Construction Lending Summit, put together by Land Gorilla, a construction loan management company.

In the opening session, Metrostudy Regional Director Paige Shipp explained the current demand for housing continues to grow across the U.S. in the starter home market.

Data from Metrostudy, a provider of primary and secondary market information to the housing industry, shows builders are currently fighting the housing shortage. For example, about 30,500 vacant construction lots show new inventory will soon hit the market in the Dallas area. However, Shipp explained there is no way to know the price point of these soon-to-be home starts.

This could be due to the Dallas area’s strong labor market. Shipp explained a strong labor market’s importance in new home construction.

“Job growth is the number one fundamental fuel of new home development,” she said.

While growth flattened out in the U.S. over the past few months, Shipp said it is important to note the increase in high quality jobs, which are higher paying and move Americans closer to homeownership.  

Other experts agree with this analysis, explaining job growth in different metros are partially responsible for the growth, or lack thereof, in new housing starts.

“Strong job growth, increasing wages, and home value growth explain much of the difference between metros that are building more than their historical average and metros that aren’t,” Trulia Chief Economist Ralph McLaughlin wrote in a recent blog.

With the demand continuing to increase, Shipp encouraged builders that for homes in the $300,000 and under range, “If you build it, they will come.”

“Labor is an issue, don’t get me wrong, but somehow we are managing to close homes in spite of it,” Shipp said, referring to the shortage in construction labor.

But despite the housing shortages and high demand, the new construction market continues to grow. Shipp explained housing starts are currently outpacing closings, signaling a growing market.

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