The US recorded a housing gap of 3.8 million last year, despite having new home construction outpace household formations for the first time since 2016.
A new data report from Realtor.com determined it would take 7.5 years to close the housing gap at the 2024 rate of construction relative to household formations and housing demand – although on a regional basis, the South would be able to close the housing supply gap in 3 years and the West would need 6.5 years, while the Midwest would require 41 years, and the Northeast could not experience any gap closure
Realtor.com also reported total housing starts last year were at their lowest level since 2020, a problem exacerbated by the slowing of multifamily construction. Still, 2024 experienced the second-highest level of single-family housing starts since 2007.
Homeowner vacancy reached 1.1% by the end of 2024, up from its historic low of 0.7% in the second quarter of 2023 but far from its 6.9% historic norms.
At the same time, just under 1 million households were formed in 2024, the lowest annual rate in eight years. In comparison, 1.36 million homes were started, outpacing last year’s household formation rate by nearly 400,000 homes. Realtor.com reported that roughly .6 million expected Gen Z and Millennial households opted not to form households in 2024 due to factors that included unaffordable housing costs.
Stop printing money and keeping people out of foreclosure and you’ll get at least 1 million listings right there.
Nicholas, if there is a housing shortage, then all for-sale homes are under contract, all builder specs are sold and they all have a waiting list of contracts they can’t sell. And
then all apartments are at 98% occupied. Not really. There is a lack of affordable homes,
due to high interest rates, high entitlement costs imposed by cities and high insurance costs. Builders are forced to build smaller homes, on smaller lots with fewer amenities and custom features, and the provide mortgage rate buy-downs to make their homes affordable. IMO
Lack of affordable housing is caused by a lack of land availability, high cost of land and design requirements by the buyers and real estate industry for more house than is necessary for basic living. Think Levittown. Also, think that if there was a Levittown today, a corporation would buy it.
Levitttown was built by a corporation. William J Levitt’s company, Levitt and Sons, built multiple suburban housing developments in the US. Private industry needs nothing but the incentive of making a profit to pitch in and solve most any problem.
Since 2008 the disparity in investor ( often large Wall St.) versus consumer purchases appears to be the largest contributor. Certainly “in fill” new construction has also had a big impact. Compounding the problem is the very large “boomer” demographic that finds them selves holding because of limited scale down options. Solutions exist, however, complicated.
First time home buyers of various ages are kept from purchasing because of unrealistic expectations. I personally know several couples that only want to buy something unaffordable for them. I bought my first house at about age 25. A little 850 sf cottage. My second home was a 1400 sf cape cod. My third home was a 2400 sf two story. My current home is a 3800 sf brick transitional with a 2 car garage. We have friends who still have not bought a house because they want a house like my current house and they whine that houses are “too expensive”. Not if you traded up 3 times, they’re not!! Buyers have no common sense. I’m so glad I switched from residential sales to commercial development in my 30s. I’d lose my mind trying to sell houses to morons.
DrekiG, you hit the nail on the head about the process and people today. I love your transitional buying history for homes! I did the same thing for my housing and stayed employed in the Real Estate industry as an appraiser & broker for 42 total years so I saw others that followed your wise path on home ownership. I would say this in that if we want more affordable homes we should be building more small 1-2 story homes with full basements. People can finish out their basements for more space down the road or with the builder. The lots could be smaller so more homes could be built per acre. The cheapest finished home is a 2-story on a slab. But if you have a finished basement, especially with 9′ ceilings, then you have a lot of house to grow into or for already larger families. The other important factor is land for new construction. Municipalities need to get in gear and get utilities out to outlying areas and zone land residential DP (planned development) that allows for flexible lot and housing standards of the developers via the demand in the marketplace. Cities and counties could offer free 3 year property taxes on the finished product. Tax only the land at its discounted builders rate. That would make housing more affordable too!
This is the biggest hurdle I’ve seen too. Unreasonable, and unrealistic, expectations. A first home typically isn’t your dream home; Its a stepping stone. Starting at the bottom and working your way to the top somehow seems to be lost on much of the younger generation.
Buying where and what you can afford is practical.
Sometimes that means moving out of your favorite town or even out of state to find a job with an income level that is sufficient for the cost of living in that area.
There are many lovely places in this huge country.
Not everyone has to live (or can afford to buy) in just the most crowded coastal strips.
Look between the coasts, and the vast majority of the country is very affordable and has many beautiful areas. An affordable place to live means you can save money to take vacations in those more expensive coastal zones. I can’t afford to live in a lot of my favorite areas, so I visit those places.
You can live and work in a more affordable area, save money, and move up or out to nicer locations if you wish to do that later.
But you might find that you come to love the affordable home in the affordable town or city in the affordable state.
But save money to travel, and you can travel modestly, even cheaply. Travel lets you visit or pass through some of the oddest places and oddest towns, but those places are fun to visit or at least just to see. When you return from traveling, you often are shocked to realize that your own home and town are pretty darn GREAT compared to some of the places you see on travel.
It’s funny that so many people in the Real Estate industry complain about how expensive homes and land are in many areas of the country.
It’s actually rather absurd because our industry has always, always, always promoted the notion that everyone should buy a home because owning a home is great investment, and home prices will always rise higher over time (despite some ups and downs along the way).
The Real Estate industry has relentlessly promoted more and more building and more and more population growth and more incentives to attract more people and more businesses to certain towns and states because more people and more businesses means higher demand and, thus, rising home values and rising land values and rising investment property values.
Now that this promise has come true in many, many areas of the country, home values, land values, commercial property values, and even agricultural land values have gone up and up and up to really high prices. The dream came true!
But now the Real Estate industry is complaining and trying to blame others for lack of affordable land and housing, but the Real Estate industry got exactly what the Real Estate always promised would happen and wanted for all those decades running!
So don’t blame anyone else! The Real Estate industry did this to itself and made it happen through endless policy pushes for more, more, more growth. And guess what. You got what you wanted.
Many places now are just too over-crowded and too expensive for new buyers.