The Fed says inventory shortages are the “new housing crisis”



The acute shortage of homes for sale has been singled out by the Federal Reserve, which says the situation could have a negative impact on the U.S. economy.

Demand for houses on property market, business metaphor

Demand for houses on property market, business metaphor

Simply put, the Fed said in a release of minutes from the Federal Open Markets Committee’s (FOMC) September meeting that there aren’t enough houses for sale. The topic was brought up during a discussion on the U.S. economy in general, and progress that’s been made since its July meeting.

With regards to the housing market, the FOMC described it as being “weak”, and added that spending on residential real estate investment was soft in the third quarter. The main reason for this is due to a lack of housing, which the FOMC termed the “new housing crisis”.

“However, the sluggishness in the housing sector appeared to have continued into the third quarter,” the FOMC said. “A couple of participants pointed to limited availability of lots and a shortage of skilled labor as restraining residential construction activity in their Districts; in one District, constraints on the supply of new homes for sale were expected to boost spending on home improvements and offset some of the drag from the slowing in new construction.”

To put it simply, the inventory of new and existing homes for sale has declined to such an extent that it’s no longer enough to satisfy the demand from younger generations looking to buy a home. In turn, this makes new homes more expensive, pricing out first-time buyers and contributing to the housing market’s sluggish recovery.

The FOMC didn’t say anything about the wider impact this might have on the U.S. economy, but the fact the issue was raised by one of the world’s most powerful economic institutions suggests it’s unlikely to be a positive one.

About Mike Wheatley

Mike Wheatley is the senior editor at Realty Biz News. Got a real estate related news article you wish to share, contact Mike at mike@realtybiznews.com.