The U.S. Housing Shortage Explained In Less Than 2 Minutes
Too Many People, Not Enough Houses
Aside from interest rates, the hottest topic throughout the real estate sector is inventory and new supply. The vast majority of both buyers and sellers have begun to fully understand why transaction volume has tanked and less people are looking to relocate; but far less have been able to wrap their head around the steep housing deficit we’ve found ourselves in.
Over the last eleven years alone, the United States housing shortage stretched 4 Million units wider. And while there are various extraneous factors that can’t be ignored and warrant careful consideration, the root issue is rather straightforward: Households are being formed faster than housing units are being built.
In 2023, 1.67 million households were formed; bringing the 2012 - 2023 total for new household formations to 17.2 million. Over this same time period, only 14.7 million housing units were started, and 13.4 million were completed.
Roughly 9.98 million of the total 13.4M were single-family homes, and 3.9 million were new multi-family stock. This left us roughly 4 million units short.
There’s plenty of blame to go around for the United States’ inability to curb its severe housing deficit; but all fingers should be pointed at this simple chain link of problems:
Building costs and construction timelines have risen exponentially throughout the country; especially within the coastal regions.
The high cost to build leads to less development. And in the instances in which there are new construction starts, the building cost burden is passed down to buyers and renters in the form of inflated home prices and steep rent rates.
The combination of expensive materials, and lengthy permitting processes, has placed the real estate sector in this stifling predicament - a rising number of households, but a stagnant supply of inventory.
As the country continues to climb out of the deep housing deficit hole its dug itself into, a myriad of policies will need to change. But taking note of the measures being implemented across Utah, Idaho, and Florida wouldn’t be a bad place to start. Over the past handful of years, these three states have led the nation in new construction starts per capita. Without dissecting their playbook page by page, two catalysts that have surely led to change are: building incentives and ease of doing business. The more advantageous and simple it becomes to build new housing stock across the country, the more homes will be delivered
If you’re considering a home purchase, sale or investment this year, and you’d like professional guidance and assistance throughout the process, our team is here to help.
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