US Housing Market 4M Homes Short of Demand

• Author: Monica Jackson
• Posted: 2023-11-13

Many states in America in 2021 are still implementing their same lock-downs from the 2020 Coronavirus pandemic, insisting that a new wave is coming and we're not out of the woods yet. However, just as many states have opened back up, and 2021 is a booming year so far in terms of real estate. This is why there is an estimated four million more home-buyers available than there are homes to buy. Housing is in huge demand as of April 2021, but it's the supply that's falling well short of meeting that demand.

According to a new report analysis by Freddie Mac, one of the nation's largest mortgage-finance companies, the US housing market has fallen 3.8 million single-family homes short of demand. This is affecting families; these are millions of families who are unable to move into a new home simply because the homes do not exist on the market. Far fewer people are actually putting their homes up for sale, and we see this happening the most in states that are still dealing with strict lock-down measures.

Freddie Mac is comparing this shortfall with similar numbers from previous years. Adjusting for 2020, which was a year of a global pandemic, previous years had plenty of room for first-time home-buyers seeking entry-level homes as young couples or couples who were just starting families.

The news doesn't come as a shock to a lot of people who deal in real estate. Experts have long known that newer homes haven't been built at the same rate as in the past, going as far back as the 2008 housing crisis. Ever since that point, fewer new homes have been built. What has driven the housing market was the actual exchange of homes; i.e. people willing to put their homes up for sale. Though in lock-down states, far fewer people are willing to do this. Even in states that have greatly loosened their restrictions, so many citizens are scared to make a move that the houses are no longer winding up on the market. And it's not as if there are a bunch of new homes out there being built in the single-family style.

Over the past decade or so, the bulk of government's taxpayer-funded housing initiatives have been geared toward low-income minority communities and immigrant communities. In other words, the government has been very busy in subsidizing free housing for America's citizens, and for millions who aren't even American. Though when it comes to moving the wheels on home-building for families looking to purchase their own homes, the government hasn't done much of anything, while they also haven't made it any easier for private industry to build new homes either. There are all sorts of new regulations imposed on home-builders every year, which makes it a lot more expensive and time-consuming to build new homes.

The general gist is that America isn't producing new homes for its rapidly expanding population, and not as many people are looking to put their homes up for sale. This has led to 2021's shortage, which may only get worse and have deeper implications.

Implications of a Shortage on the Market

Most people know what happens when you have a high demand but a limited supply. That supply goes up very steeply in price to control for it. Similar to price gouging, whereby generators increase in price tenfold during natural disasters to keep people from hoarding them, we're likely to see housing prices greatly increase. The idea behind it isn't nefarious either; no one wants to some developers grabbing up as many homes as they can to flip with an outrageous price, and so the prices of homes are going up to dissuade that sort of activity. The issue, however, is that it's the first-time home-buyers who end up having to pay a lot more for homes, and they end up struggling to keep up with their mortgages.

The longer the housing shortage continues, the more the prices are going to continue to rise. If more houses don't start appearing on the market soon, what you may see are starter homes sitting empty because they're too expensive for anyone to purchase.

This can have wide-reaching implications on the entire housing market, as more prices will adjust to compensate. We all know mortgage lenders aren't shy about raising their rates. So some experts warn that unless we fill this shortage of single-family homes, we could end up with another housing crisis in a few years.