US Facing Severe Housing Shortage, Report Finds
The U.S. is facing a housing shortage due to underbuilding relative to population growth over the past decade. According to a new report from Realtor.com, the country is currently missing up to 6.5 million new single-family homes. This has led to rapidly decreasing affordability and has pushed many would-be homebuyers out of the market altogether.
The report found that the rate of total housing starts (including both single-family and multi-family building) would need to increase by 50% from the 2022 rate to an average rate of 2.3 million housing starts per year to close the existing 2.3 million home gap. This would bring construction activity back to figures seen in the early 1970s and some of the highest months of building in the mid-2000s. In order to close the current 6.5 million home gap in 3-4 years, the rate of housing starts for single-family homes would need to be tripled.
Data on new residential construction indicates that the percentage of affordable homes (less than $300,000 sales price) being built is rapidly decreasing. In the fourth quarter of 2022, just 10% of new homes sold were priced under $300,000 and only 37% of new homes sold were priced under $400,000 (down from 66% in 2019). In recent years, the rapid increase in prices combined with a sudden surge in mortgage rates in 2022 has resulted in buyers having to pay a much greater amount in their home payments than in previous years.
According to an index of homebuilder confidence, the sentiment of homebuilders decreased from 83 in January 2022 to 31 in December, the lowest level since the start of the pandemic. Realtor.com Chief Economist Danielle Hale said that “As inflation and mortgage rates likely soften later this year, buyers are likely to return to the market and be in search of an affordable home, and the ongoing housing supply shortage will only continue to put pressure on the market. The good news is that overall inventory levels are increasing from their pandemic lows, and with less competition in the market from other shoppers today some homebuilders are now offering prospective buyers incentives that may help some new home buyers find success in this challenging market.”
NAHB Chairman Alicia Huey also noted that “the urban core market share has fallen compared to pre-Covid levels. During the fourth quarter of 2019, urban core markets of small and large metro areas represented 47.
0. “The US housing market is short 6.5 million homes” CNN, 8 Mar. 2023, https://www.cnn.com/2023/03/08/homes/housing-shortage/index.html
1. “U.S. has a shortfall of 6.5 million single-family homes due to a decade of under-building, report says” Morningstar, 8 Mar. 2023, https://www.morningstar.com/news/marketwatch/20230308373/us-has-a-shortfall-of-65-million-single-family-homes-due-to-a-decade-of-under-building-report-says
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