The U.S. housing market is facing a supply deficit, with 3.8 million single-family homes less than buyer demand, The Wall Street Journal reported Thursday (April 15).
According to a new analysis by mortgage-finance company Freddie Mac, the estimate represents a 52 percent rise in the country’s home shortage compared with 2018, when Freddie Mac first reported on the shortfall.
“We should have almost four million more housing units if we had kept up with demand the last few years,” chief Freddie Mac economist Sam Khater said, according to the news outlet. “This is what you get when you underbuild for 10 years.”
The issue is one that shows the dire crisis the housing market is in, with an especially acute shortage for entry-level homes making it more difficult for first-time home buyers to enter the market.
Freddie Mac reached its numbers through assessments of the level of single-family home building that would be needed in order to match the demand from the household formation, second home purchases and replacements for damaged or aged homes. That was then compared with the price of construction, WSJ writes.
The supply shortage will push up housing prices, creating obstacles for the market and making it harder for newer homebuyers to accumulate wealth.
Citing Commerce Department data, the Journal reported that while single-family housing starts rose last year to 991,000 units, the highest rate since 2007, starts then dropped in January and February on a seasonally adjusted basis while construction costs rose.
The pandemic has shifted many aspects of life, including the way people think about where they want to live. PYMNTS reports that those working from home found it freeing to be able to move to other areas, including locales outside of the big cities where their offices were located.
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