A defining feature of the residential real estate market over the last six months has been the historically low existing home inventory. Buyers are closing on homes at an incredible rate, and it has been difficult for the supply of residential real estate to keep up with historic demand. Now developers are starting to tap into the robust home-buying market. New home starts are up nationally. This growth is being seen in a big way in St. Louis.
According to data from the Census Bureau, there will be 1.42 million housing starts in the United States during 2020 at a seasonally adjusted rate as of September 2020. If that happens, it will be the highest number of new, single-family homes built in a single year since 2007. It is also an increase of 11.1% year over year.
The numbers are also quite good for St. Louis. There have been 4,265 new home starts in the area through September, up 8% from the same period last year. The Home Builders Association of St. Louis & Eastern Missouri reports that 1,210 new single-family home permits were issued up through August in St. Charles County and 518 in St. Louis County. This is up from 1,143 and 492 within the same period last year, respectively. Jefferson County is also up to 558 from 491 last year.
What’s driving this rush of new home construction in St. Louis is the same as what is driving it across the country. Interest rates are extremely low, COVID is compelling people to live from their homes more than ever, and there aren’t enough houses on the market to meet the high demand. According to data from Zillow, housing inventory is down 39.1% in St. Louis over last year.
According to the St. Louis Business Journal in conversation with local housing developers, even as COVID fueled demand for homes, it also posed some unexpected difficulties. Social distancing requirements and the rocky job market have caused some issues, even though home construction has been an essential business through the whole pandemic.
One thing that has driven up construction cost is the skyrocketing cost of lumber. The combination of COVID-disrupted supply chains and the sudden increase of demand has caused the price of lumber to more than double since April, according to data from the National Association of Home Builders. They report that this has caused the average cost of a new single family home to increase by over $16,000 since April.