Not Enough New Construction in Southwest Florida
According to a new study released by the National Association of Realtors (NAR), in 80% of measured U.S. metro areas, the number of new homes under construction falls short of demand based on the number of new jobs that have been created.
In Florida, after analyzing and comparing the employment statistics with new building permits, the NAR reported that there’s a shortage of new single family homes in almost all of the state’s statistical regions. In the Miami-Fort Lauderdale, Tampa-St. Petersburg, Cape Coral-Fort Myers and Naples-Marco Island regions, the shortfall of new home construction is particularly pronounced. Specifically, in the Naples-Marco Island region, there’s a need for at least 3,020 new homes to keep pace with the improving economy in general, and improving job statistics in particular.
A shortage of homes in relation to job growth will naturally lead to sharply rising home prices. Lawrence Yun, the chief economist for the NAR sheds light on the discrepancy: “Without the expected pick-up in building as job gains rose in recent years, new and existing inventory has shrunk, prices have shot up and affordability has eroded despite mortgage rates at or near historic lows.”
Historically, the normal ratio for a well-balanced market when comparing the employment rate in relation to total building permits should be about 1.6. In both lee and Collier counties (where Naples-Marco Island is located), the ratio is underwater. In Collier county, for example, where 16,433 jobs have been added, that ratio stands at 2.2. This will serve to put upward pressure on home prices in the near and medium term.
Home builders, aware of the situation and gaining in confidence, will likely seek to take out increased permits on new construction. Indeed, in a separate report released by the National Association of Home Builders, the organization said its index of builder confidence jumped six points in September, the highest level it has been at in about a year.
All of which should bode well for further job creation and economic growth, both nationally and locally.