Booming markets see lag in construction activity | Bedford Corners Real Estate

Markets that are seeing the greatest rebound in home prices are also seeing the biggest lag in construction activity, the latest data from Trulia (TRLA) revealed.

Asking home prices rose 11.0% on an annual basis and 1.2% on a monthly basis in august. However, when taking a deeper look at the data, it is obvious that construction activity isn’t back to normal levels quite yet.

In 2013, construction permits are running at only about 60-70% of their average level between 1990 and 2012. Las Vegas, Sacramento, Riverside-San Bernardino, Warren-Troy-Farmington Hills and Detroit are among the housing markets where asking home prices increased more than 20%. These markets saw construction activity at less than half the normal level.

According to Trulia Chief Economist Jed Kolko, there is a very obvious explanation for this: Investors and builders have bet on different markets.

“Investors have bought in the boom-and-bust metros, helping push prices up more than 20% year-over-year in Las Vegas, Sacramento, and Detroit,” said Kolko. “Builders, however, are betting on markets that avoided the worst of the crash, like Boston, much of Texas, and the expensive California coast, where job growth is strong and few homes are vacant,” he added.”

http://www.housingwire.com/articles/26659-booming-markets-see-lag-in-construction-activity