Home construction stalls rose 47% during the pandemic

The coronavirus pandemic and its ripple effects contributed to a 47% rise in stalled housing construction projects nationwide between 2019-21, according to a new LendingTree report.

Housing construction permits and starts rose considerably over the same time but completions only ticked up 7%, the analysis of U.S. Census Bureau data found. The shortage, fueled by a shortage of workers, sharp wage hikes and global supply chain challenges, will keep a supply-starved housing market waiting.

“Over the coming months, rising mortgage rates may cool demand and help reduce home prices somewhat, but a lack of completed new construction could mean that prices will nonetheless remain high through the summer homebuying season,” said Jacob Channel, LendingTree senior economic analyst, in a press release.

Home prices in the first quarter of this year soared 20% compared to the same period in 2021, according to Fannie Mae, although the jump was likely pushed by buyers getting ahead of rising mortgage rates. The environment has strained affordability and pushed down mortgage applications, leading homebuilder sentiment this week to dip to a seven-month low.

The number of housing units authorized by building permits nationwide rose 25% while the number that started construction leapt 24% between 2019-21, according to LendingTree. Growth was concentrated in the South and Midwest, where completions increased 14% and 8%, respectively.

Stalled housing construction more than doubled in the Northeast, the report said, while the West was the region with the smallest jump in unfinished construction projects, up 19%. The slowdowns are complicated by labor issues, with construction wages growing at their fastest rate in 40 years and the labor force participation rate below its level in 2019, LendingTree said.

Also constricting the housing pipeline are rising material costs including volatile lumber prices. Building material prices have risen 8% since the beginning of the year and 33% overall since the onset of the pandemic, according to the National Association of Homebuilders. The Russian invasion of Ukraine, which already bumped mortgage rates, is also impacting raw material and fuel costs, the report said.