The Housing Shortage Hits Crisis Levels: What Homebuyers, Sellers Need To Know Before Making a Move By Clare Trapasso
Jul 25, 2023
The United States is facing an unprecedented housing shortage, and the situation shows no signs of improvement. As the supply of homes for sale dwindles, prices have soared in recent years, leading to intense bidding wars and offers exceeding asking prices. Realtor.com® estimates that the country is currently short between 2.3 million and 6.5 million housing units, with underbuilding being a significant contributing factor, according to Danielle Hale, chief economist of Realtor.com.
The roots of this crisis can be traced back to the population explosion since 1950, accompanied by an aging demographic. As Americans live longer, they occupy homes for more extended periods, leading to increased demand. Additionally, societal changes, such as delayed marriages and more young adults living with their parents, have added to the demand for housing. On the flip side, older Americans are often staying in larger houses even after their children have moved out, creating a mismatch between available housing and the needs of growing families.
Builders face significant challenges in meeting the demand for housing. Many construction companies went out of business during the Great Recession, leading to a massive drop in new construction. Today, the industry is grappling with a lack of construction labor, available lots, lumber, building materials, and financing. Regulatory costs and higher interest rates further impede builders from constructing affordable homes.
The housing shortage crisis is compounded by higher mortgage rates, intended to cool the housing market, but instead, have discouraged homeowners from selling and downsizing. As a result, many choose to stay put, reducing the availability of homes for sale. Investor sales of single-family homes have surged, further impacting housing inventory.
While there is a bright spot in the nearly 1 million apartments under construction, it may not be enough to offset the housing shortage. Rental units may experience an oversupply in certain markets, potentially driving rents down. However, addressing the housing crisis requires a comprehensive approach involving collaboration among policymakers, builders, and communities to increase homebuilding, make homeownership more accessible, and adapt to changing demographics. Only through concerted efforts can the nation begin to alleviate the strain of this critical housing shortage and ensure a stable future for homebuyers and sellers alike.