We recently noted in our October real estate update that there are only 1.7 months of supply in the Madison housing market. We're expecting more of the same for the foreseeable future, and here's why:
New home construction is low.
Although there is a genuine need for more inventory, new housing starts remain about 50% below the peak levels from 2002 - 2005. One big reason for this is the last real estate downturn put many home builders out of business. With fewer builders in the marketplace, fewer homes are being built.
Housing starts for duplexes and single family homes have basically plateaued, as can be seen in this graph below. It's also important to note that new condo construction is at a virtual standstill and nowhere near the level
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