- Experts say the decades-long US housing shortage will only get worse in the coming year.
- The homebuilders’ chief economist says that due to rising mortgage rates, the 2023 market will be “weak.”
- Policy expert: “We’re seeing housing underproduction in every corner of the US.”
How bad is America’s decades-long housing shortage?
Terrible according to recent data, experts say. And apparently no improvements for the foreseeable future thanks to continued demand for homes despite rising mortgage interest rates and high house prices.
“There seems to be no end in sight,” Nadia Evangeloua senior economist and forecasting director at the National Association of Realtors told USA TODAY.
Depending on who you ask, experts believe there is a nationwide housing shortage of between 2 million and nearly 6 million newly built homes.
Evangelou said the association estimates there is a shortage of 5.5. million homes. The organization uses its housing shortage tracker to compare supply and demand by the number of single-family housing permits issued per two new jobs in 175 US markets.
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Where is the greatest housing shortage?
The most severe underconstruction is occurring in major cities, according to experts.
For example, Los Angeles is among the least produced housing markets in the US with a shortfall of almost 400,000 homes or about 8.4%. Mike Kingsella, CEO of Up for Growth, a Washington, DC-based nonprofit housing policy research organization, told USA TODAY. In July, ready for growth published a study tracking over 800 US real estate markets. across the country from 2012 to 2019.
And like Up for Growth, the National Association of Realtors also cites Los Angeles as one of the big cities with a severe housing shortage. The Los Angeles metro area had 247,400 new jobs compared to 11,206 single-family permits, Evangelou said.
Still, LA isn’t the most severely underbuilt.
That distinction belongs to the New York City-Newark and Jersey City, New Jersey metropolitan area. There were nearly 497,000 new jobs compared to 13,229 single-family permits issued in that metro area during that period, Evangelou said.
Other areas that have a severe housing shortage include the San Francisco-Oakland-Hayward, California area, the Boston-Cambridge-Nashua, Massachusetts area, and the cities of Springfield and Rockford, Illinois.
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Will the housing shortage spread?
Once confined to the coasts and the Southwest, the lack of enough housing production to meet demand now affects nearly every state and several major US metropolitan areas, Kingsella said.
“We are seeing housing underproduction in every corner of the US,” said Kingsella, whose nonprofit estimates there is a housing shortfall of 3.8 million. This also means that we are perversely increasing housing costs.”
Can zoning solve the housing shortage?
Cities with a shortage of single-family homes often share similar traits, Evangelou said, including land-use restrictions that affect home construction.
Kingsella said many cities and states need to change or update zoning laws to allow more housing. Kingsella said that states, including California, Oregon Y Maine and cities like austin, texaspassed laws to end single-family zoning and now allows the construction of more than one home per parcel of land.
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Where is the real estate market headed?
Despite a slight increase in inventory due mainly to price-weary would-be buyers, supply is expected to remain tight for some time, said Robert Dietz, chief economist at the National Association of Home Builders.
In a declaration last week, after the homebuilders group NAHB said homeowner confidence is down for the 10th month in a row, Dietz said single-family construction will see a sharp drop next year, “as Higher interest rates and ongoing high construction costs continue to drive the price out of a large number of prospective Buyers.”
The 30-year fixed mortgage rate on Monday was 7.29%, according to Daily Mortgage Newsmarking the highest 30-year rate in 20 years.
“Nobody saw this coming. We thought maybe a 5% top interest rate, but not 7%,” Evangelou said, adding that the National Association of Realtors had to readjust its forecast several times this year.
He too Median home sales price in the US was $384,800 in September, an increase of 8.4% from the benchmark price of $355,100 in September 2021 as prices rose in all regions, the association reported.
Assuming a 10% down payment, the monthly mortgage is $1,000 higher than it was a year ago, Evangelou said.
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Last month, Federal Reserve Chairman Jerome Powell said the housing market may need “a correction” to make homes more affordable.
Dietz predicts that the Federal Reserve will cut interest rates no later than 2024, leading to a rebound in the housing industry.
“The market for 2023 will be weak until then,” Dietz said. “Home prices will stay high and supply will be low.”