America Needs More Homes, so Why are Builders Cutting Back?

New construction was put on pause during the first couple of months of the COVID-19 pandemic, when large parts of the American economy shut down.

While the number of new homes being built has rebounded since then, things began to slow in May 2022.

Bedeviling the industry are rising mortgage rates—driven up by the Federal Reserve’s efforts to combat inflation—supply-chain issues, and the rising costs of materials.

The number of employed residential construction workers has increased and surpassed pre-pandemic levels, but remains below its peak before the 2008 housing crisis.

Construction of New Homes has Slowed

Home builders’ confidence in the market for new single-family homes dropped to its lowest level since June 2020, according to a poll conducted by the National Association of Home Builders.

The findings reflect the effects of high inflation and slow economic growth, which coupled with high home prices are making it difficult for many Americans to buy.

Low mortgage rates during the coronavirus pandemic sparked a sharp increase in home prices, which by March 2022 had risen 20.6% from the year before.

Home Construction Employment Plateaued After Rebounding From the 2020 Low

A lack of skilled labor is holding back additional home construction, according to the Home Builders Institute.

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