Home builders will help save America's sluggish housing market, says Fannie Mae. Now for the bad news.

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As the U.S. housing market works through a major shortage of homes, builders appear to be the most valuable players.

The U.S. housing sector is back in full swing and builders are best positioned to ride the wave, Fannie Mae’s FNMA economists say.

The key players poised to reap the benefits of — and permanently fix — this imbalance are home builders, according to two economists at mortgage-financing giant Fannie Mae. The government-owned enterprise purchases mortgage loans from lenders and either holds them on their books, or packages them into mortgage-backed securities — and sells them to the broader market.

During the Great Recession from 2007 to 2009, builders sharply pulled back on new-home construction. Housing starts fell from an annual rate of 2.27 million in June 2006 to 478,000 in April 2009 — a fall of nearly 80%, as seen in the chart below which spans from 2006 to 2013. The pandemic hurt production even further, as builders pulled back in the face of uncertain demand, as well as to stop the spread of the coronavirus.

“You’ve had a significant change in how people work, and where they work,” he added. “People adjusted their housing situation to reflect that. And they don’t need to adjust it again.” Still, builders are also able to offer incentives to aspiring homeowners to help them buy a home, a tactic that most homeowners may not have at their disposal.

 

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