If you compare any single decade's worth of American housing production--single-, multifamily, and manufactured home starts--historically with the pacing of the current ten-year stretch of 2010 to 2020, something pops out at you right away.
(See George Casey's column "A Look Around the Corner" for a logic on the math here.)
There's about a 5.5 million difference--to the worse--between this decade and the ones we'd been gathering such data in the past. That hard number delta and the reasons for it are, thus far, the story of a housing recovery that began in 2012 and has been creeping along ever since.
That big difference defines, for some analysts, economists, and community observers, the magnitude of a gap between demand and supply. Still, that doesn't even count for the population and [recent] household increases during the current 2010 to 2020 stretch.
Thanks to that gap between normal vs. actual supply and normal vs. pent-up demand, prices on new homes have girded the market in a vicious circle, effectively cadencing new home supply to a limited, higher-end pool of buyers. Scarcity equals price pressure equals less and less affordability, which adds up to more scarcity, a self-confirming run-on equation.
Now, that is the rule, and it's questionable now as to what might break that rule in any broad-reaching, high impact way. If developers and builders could wave a wand and bring online a whole lot of new communities penciled to be profitable in farther-out, higher-density, lower-square-footage, lower priced product offerings, supply at those lower price tiers would increase, transactions at that level would balance off the move-up and second-time move up factors in the equation. Then, you'd see prices moderate, or even drift downward, allowing household income levels and pricing trends to couple back up after this period of unhinging.
But there's no wand-waving going on here. Many of the big builders are revving their entry-level product line and land strategy engines now. Following LGI, D.R. Horton, Lennar, Pulte, NVR, and Meritage have gotten especially aggressive with homes aimed at first-time, just-out-of-rental buyers.
Builders with the wherewithal to program and market their lot and community pipeline for the task of moving at a higher-volume and pace are accelerating their operational push on these opportunities.
This push is timely, especially as they're motivated to monetize their land assets and drive inventory turn volume through and past the top of a cyclical parabola many believe has, is, or will take place--give or take six to 12 months either way.
What's particularly important now is where a builder is operating, or could be operating and generating incremental home sales volume with an acquisition. Jobs-to-permits ratios are probably the purest proxies for markets to watch, especially in geographies where developmental costs and regulatory fees, permits, and tax burden don't act like a wet blanket that suppresses normal behavior when job formations surge.
Here, Forbes staffer Kurt Badenhausen spotlights the title's annual "Best Places for Businesses and Careers" which looks at a cross-section of factors for both corporate location and domestic talent migration to rank 401 U.S. metro areas.
Fortunate for new residential developers and builders, many of the best places for both business and career are in "Smile State" environs--ranging from the Carolinas, Georgia, and Florida, across to Utah, Oregon, and Washington, with Colorado's Denver ranking No. 1.
What the new and evolving geography of jobs and young-people talent magnetism shows is that economics shift, and are in the process of shifting faster and more profoundly than in other eras of economic history. That this list is developed annually, and that its rankings are as fluid as they are says that there are big clouds of uncertainty hovering over how long today's geographical over-achievers and rising stars will remain that way.
You only need to take a look at what's going one in entrepreneurial start-up trends to understand that predicting where and how structural growth will find its footing in the United States is practically impossible. Importantly, politics, regulation, and taxation may play important roles in whether America can get its entrepreurial mojo back or not.
Needless to say, though, that while national housing's characteristics reflect a slow, arduous, straining attempt to overcome supply constraints to meet evident, pent-up, and capable demand, that is the rule, as well.
It's exceptions to the rule one can detect in analyses like this one that will make or break opportunity for home building operators. Note that some of those "red flag" areas that are in the "worst" category for business and careers are some of the most vital, opportunistic market arenas for certain kinds of builders.