A shortage of homes for sale has bedeviled U.S. house hunters in recent years, so why don’t builders build more? One problem is that they’re running out of lots to build on—at least in the places that people want to live.
Cities that were sprawling before the Great Recession have begun to sprawl again. Space-constrained cities, meanwhile, have run out of room to build. That reality has spurred developers to focus on center-city neighborhoods where high-density building is allowed—and new units command exceedingly high prices.
At some point, said Issi Romem, chief economist at BuildZoom, vacant lots in desirable urban neighborhoods will run out. “If you have three days of rations left, you’ll be fine on day one, two, three,” said Romem, author of new research demonstrating home construction patterns. “On day 4, you have a problem.”