How Bad Is the Housing Shortage? (2024)

FAQs

How bad is the US housing shortage? ›

According to a report from the National Multifamily Housing Council, the U.S. will be 4.3 million apartments short of meeting the demand for housing by 2035.

Several issues have contributed to the country's current housing shortage, including the pandemic, inflation and increased interest rates. Essentially, though, it's a problem of supply and demand: New home construction dropped precipitously after the Great Recession and has yet to fully recover.

Home prices are up more than 30% over the past couple of years, making homeownership unaffordable for millions of Americans. Rents are rising sharply too. The biggest culprit is this historic housing shortage. Strong demand and low supply mean higher prices.

Story at a glance

California currently has the largest deficit of homes at 980,000.

Experts are predicting another 10% to 15% drop by the second or third quarter of 2023, according to multiple sources. Several other factors point to a further home price correction.

Chicago, Illinois, Houston, Texas, Dallas, Texas and Washington, DC follow, where the affordable housing shortage exceeds 150,000 rental units. The gap between affordable housing supply and demand is slimmer in Louisville, Kentucky, short by 15,300 rental units, and Buffalo, New York, short by 17,300 units.

That's largely due to the shortage of housing supply, which has hit middle income buyers the hardest. Thanks to elevated mortgage rates, the housing market is missing around 320,000 homes priced at or below $256,000 – the maximum price a middle-income buyer earning up to $75,000 can afford.

After falling in 2023 and 2024, home prices are predicted to plateau in 2025 before rising again at just above the rate of inflation. However, due to the spike in home values from 2020 through 2022 due to record-low mortgage rates, median sales prices will take at least until 2027 to regain the highs of mid-2022.

What state has the lowest housing inventory? ›

Five states—Kansas, Washington, Nebraska, Utah, and Missouri—have averaged less than one month of housing supply since the beginning of 2022. In contrast, eight states have averaged more than 2 months' supply, including expensive states for housing like New York, New Jersey, and Hawaii.

Nine months into 2022, only 18% of households could afford the state's median priced home, the California Association of Realtors reported. And the estimated minimum annual household income needed to buy a median priced home increased from $148,400 to $192,800 over that time period.

The US hasn't built enough homes in recent decades. The shortage is among the reasons homes are unaffordable for many Americans. It could also be contributing to other problems — like inequality, low birth rates, and climate change.

Low-Income Households Are Particularly Affected by Unaffordable Housing. Households with the lowest incomes are by far the most likely to have housing costs that are unaffordable.

California's chronic shortage of housing manifests itself in sky-high housing costs, the nation's worst poverty and its highest level of homelessness.

California, Illinois, New Jersey, and Delaware are home to the most at-risk housing markets, according to a Special Housing Risk report released by real estate data firm ATTOM. “Some parts of the country remain considerably more exposed to housing market declines than others,” says Rob Barber, CEO of ATTOM.

With mortgage rates declining faster than expected, home prices are likely to remain mostly flat throughout 2024. This will be good news for buyers who have been waiting on the sidelines for a good time to enter the market.

These organizations predict that mortgage rates will decline through the first quarter of 2024. Fannie Mae, Mortgage Bankers Association and National Association of Realtors expect mortgage rates to drop through the first quarter of 2024, by half a percentage point to about nine-tenths of a percentage point.

In 2008, the housing market bubble burst when subprime mortgages, a huge consumer debt load, and crashing home values converged. Homeowners began defaulting on the home loans.

How many people in the US need affordable housing? ›

Record-breaking numbers of families cannot afford a decent place to call home: Nationally, there is a shortage of more than 7 million affordable homes for our nation's 10.8 million plus extremely low-income families.

The United States subprime mortgage crisis was a multinational financial crisis that occurred between 2007 and 2010 that contributed to the 2007–2008 global financial crisis. The crisis led to a severe economic recession, with millions of people losing their jobs and many businesses going bankrupt.

All the cities on this graphic are classified as severely unaffordable⁠—and, for the 12th year in a row, Hong Kong takes the top spot as the world's most unaffordable housing market, with a score of 23.2.

According to the 2023 International Housing Affordability Survey by Demographia, three out of the 10 least affordable housing markets are in Australia and New Zealand, two are in Canada and four more are located in the United States. The least affordable housing market is Hong Kong.

There simply aren't enough houses on the market to meet the demand that's out there right now. According to the National Association of Realtors, the supply for homes in the US that are for sale reached a record low in 2022.

It's also worth noting that while foreclosure rates are up year-over-year, experts do not expect to see a wave of foreclosures in 2023, even where home values are depreciating, as many homeowners have substantial equity due to progressive home price appreciation in recent years.

The average life span of a house in the United States is about 50-70 years. Houses can last for decades if they are well-maintained and have been constructed with quality materials. A poorly built home may not last more than 20 years.

Personal homes will be almost fully independent of a dangerously overtaxed energy grid. One hundred years in the future, our houses will be, in almost all respects, semi-living, artificial organisms—closed systems with a metabolism, sensory apparatus, immune response, and an approximation to a nervous system.

The Biggest Culprit: The Lenders

Most of the blame is on the mortgage originators or the lenders.

Is there really a shortage of housing? ›

As a result, there is a sizable shortage of new homes after more than a decade of under-building relative to population growth, according to a new analysis from Realtor.com released Wednesday. The gap between single-family home constructions and household formations grew to 6.5 million homes between 2012 and 2022.

Belgium, Canada, Denmark, Korea, Luxembourg, Malta, New Zealand, Portugal, Romania, and Slovenia are among the countries with social housing systems.

Homebuyer.com data analysis indicates that, for first-time home buyers, June 2023 is a good time to buy a house relative to later in the year. This article provides an unbiased look at current mortgage rates, housing market conditions, and market sentiment.

By the fourth quarter of 2024, the firm expects home prices to fall 19% in Austin, 16% in Phoenix, 15% in San Francisco, and 12% in Seattle.

Home prices in March saw the biggest annual drop since 2012 as pending home sales continue to abate, according to a new report. Last month, median U.S. home prices dropped — led by pandemic boomtowns and pricey Bay Area markets — by 3.3% to $400,528, according to real estate brokerage Redfin.

"While many parts of the U.S. are experiencing price declines, home values have held steady in the Southeast." Bankrate said Gainesville ranked No. 1 because homes in the area have appreciated 40% in one year, higher than any other location in the analysis.

Bay Area home values are falling, and are expected to fall further in the next year after reaching new heights in spring 2022. San Francisco home prices will tumble further than any other U.S. metro area next year, according to Zillow. “You could, in theory, say housing is in a recession,” Bellisario said.

Sixteen million homes currently sit vacant across the U.S. In every state across the country, many homes remain empty while hundreds of thousands of Americans face homelessness.

Are homes in the US unaffordable? ›

The cost of buying a home is drifting further out of financial reach for the average American, according to a report from Redfin. The real estate website analyzed homes that went on sale last year and found that only 21% of them were affordable, meaning that nearly 80% of homes were outside the typical buyer's budget.

Studies have shown that for the past 40 years, housing supply has not kept pace with demand, resulting in a housing shortage ranging between 2 million and 6 million homes. Yet across America, a combination of recalcitrant homeowners and outdated zoning laws routinely block attempts to build more housing.

There is a shortage of 7.3 million affordable and available rental homes for renters with extremely low incomes in the US, up 8 percent from 6.8 million in 2019. The lack of housing options for renters with extremely low incomes are driving the overall affordable housing shortage across the country.

High costs of living, inadequate wages, and wealth and income inequality; A safety net that does not provide sufficient housing or supportive services.

As prices become unsustainable and interest rates rise, purchasers withdraw. Borrowers are discouraged from taking out loans when interest rates rise. On the other side, house construction will be affected as well; costs will rise, and the market supply of housing will shrink as a result.

This slowing housing market is expected to pull the U.S. into a recession, which is forecasted to come at the beginning of 2023. But the housing market could also be what pulls the economy out once again, Fratantoni said. Interest rates could begin to decline next year after the Fed eases its rate hikes.

During a traditional recession, the Fed will usually lower interest rates. This creates an incentive for people to spend money and stimulate the economy. It also typically leads to more affordable mortgage rates, which leads to more opportunity for homebuyers.

Buying a property during a recession has advantages

Auctions may yield a reasonably priced house. To boost the economy, the Fed reduces interest rates during recessions. Banks decrease rates, including mortgage rates. Cheaper mortgage rates mean lower house costs over time.

Housing Market Forecast for California Metro Areas

Based on Zillow's data and CAR's data, the California housing market is expected to experience a slowdown in 2023 and 2024. According to Zillow, the average home value in California is $728,121, down 3.4% over the past year, and homes go pending in around 15 days.

Do rent prices go down in a recession? ›

Just because there's a recession doesn't necessarily mean rent prices go down. In fact, during the 2008 recession, it was the exact opposite. In the current rental market, we have seen the rate of increase in rental prices come down, but this only translates to lower rent prices if you're in select markets.

However, believe it or not, home prices usually tend to drop in a recession. But they don't always decline in every downturn. Home prices dropped four out of five times in the last five recessions. They usually fall at an average of 5% each year the economy remains in a recession.