Home building is on the rise, but still outpaced by demand

The Census Bureau has released third quarter statistics on the building permits for single family and multi-family homes.  You can download the report from the Division of Housing

Since the all-time low in 2009 we continue to see steady growth upwards.   While more new homes would  help with the low inventory of available homes in the Denver metro area, it looks like the rate of building is going to remain well below the  activity we saw back in 2007.  What we’ve really seen over the last 6 years is slow housing production coupled with steady population growth.  Until the home builders can catch up with the demand I expect we’re going to see steady price increases in home sales (and rent increases in rentals) for several more years.

Below is a graph that shows the volume of home sales relative to population growth.    As the population increases over time we see a similar increase in the volume of homes sold.  There are times when the housing sales are well above, or below the population line.  Those are times of housing recessions or housing booms.  Notice that when we had the last hyper-boom in housing (2003 – 2006) the volume of home sold was way above the rate of population growth, and during the recession the number of homes sold was way below the rate of population.  With our current home sales very close to the population rate I think we have several years before we get into another hyper boom housing market.

The take-away:  Buy a new home (or investment property) now while mortgage rates are low because it’s going to be awhile before our next hyperboom.