The US housing crisis continues as the backlog of needed homes is now at 5 million. Construction firms and real estate developers can’t make new homes fast enough to supply the demand.
US Housing Crisis: Homes For Sales Nearing Record Lows
If you’re in the market right now for a house, chances are you’ll find very few units available, and most are going at higher-than-expected prices. With the supply of houses far below the demand, don’t expect the housing crisis to ease up anytime soon.
Currently, the United States is experiencing a housing crisis. From a backlog of 3.84 million in 2019, the country is now short by 5.24 million homes. This represents an increase of 1.4 million during the last two years.
The latest US Census showed that in the last nine years,12.3 million new American households formed. However, the US only managed to build 7 million new homes during the same period. By definition, household formation is when an individual moves out of a shared living situation.
Construction Woes Contributed to US Housing Crisis
The home construction market faced a number of challenges beginning last year when the pandemic started. The coronavirus outbreak magnified an existing labor shortage. This further pulled down the number of workers that can build new homes.
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In addition, supply chain disruptions wreaked havoc on building materials. When mills shut down, supplies of lumber became scarce, causing prices to skyrocket. Meanwhile, the demand for new homes led to increases in land prices.
Despite a slower rate of new household formation, the challenges for home builders remain staggering. With the present demand, the need to double production pace in order to meet demand within six years.
Pandemic Made US Housing Crisis Worse
Realtor.com chief economist Danielle Hale said that the pandemic made things worse. “The pandemic has certainly exacerbated the US housing shortage, but data shows household formations outpaced new construction long before Covid.
Put simply, new construction supply hasn’t been meeting demand over the last five years,” she said “Millennials, many of whom are now in their 30s and even 40s, have debunked the industry’s ‘renter generation’ expectations,” Hale added.
Single-family home construction continues to rise steadily since the end of the 2008 recession. The current pace is running its slowest pace since 1995.
Experts attribute the slower pace to the fact that the current largest generation is just approaching its typical home buying period.
Lower Expectations For Rest of 2021
As a result, home builders across the US are now lowering their expectations for the rest of 2021. PulteGroup, one of the largest homebuilders, lowered its 3rd quarter and full-year guidance for home closings, citing supply chain disruptions.
“Despite the extraordinary efforts of our trade partners, the supply chain issues that have plagued the industry throughout the pandemic have increased during the second half of the year,” Pulte CEO Ryan Marshall said.
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“We continue to work closely with our suppliers, but shortages for a variety of building products, combined with increased production volumes across the homebuilding industry, are directly impacting our ability to get homes closed to our level of quality over the remainder of 2021,” he added.
Not surprisingly, the shortage is helping prices for new and existing homes to rise at record rates. New homes now come at a median price tag of $300,000.
However, the cost is now only 32% of builders’ sales in the first half of 2021. In contrast, the rate for the same house is 43% in 2018. Given the rising costs, builders simply can’t afford to construct cheaper homes.
Watch the CNBC video report on the US Housing Crisis: Is the US in another housing bubble?
Are you in the market to buy a house? What was your experience in looking for a residence? Do you find it more difficult to buy a house now compared to before?
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