Why hasn’t the inventory shortage fueled more home construction?

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By: Teke Wiggin Staff Writer Sep 17, 2013

Ever wondered why, in the face of a sharp inventory shortage, new home construction still lags so far behind other housing indicators? Two reasons, according to Trulia Chief Economist Jed Kolko: 1) Because, despite a supply shortage, the vacancy rate remains elevated, thanks to a glut of unlisted vacant properties, many of them foreclosures. The market does not have a housing shortage, just a shortage of for-sale listings. “Many of those vacant, off-market homes could come onto the market, especially if their owners are just waiting for prices to rise enough to make selling worthwhile,” Kolko wrote in a blog post. 2) Because household formation, which fuels demand, is only half its normal rate.

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