Analysis by Freddie Mac has revealed that the U.S. needs almost 4 million more homes to be listed for sale in order to meet the current high level of demand.
Freddie Mac said in its analysis that there’s a total shortfall of 3.8 million homes for sale in the U.S., a 52% increase in the housing shortage since 2018.
“This is what you get when you underbuild for 10 years,” Sam Khater, Freddie Mac’s chief economist, told the Wall Street Journal. “We should have almost four million more housing units if we had kept up with demand the last few years.”
The report echoes comments made by the National Association of Realtors’ chief economist Lawrence Yun last month. Yun, who has been one of several real estate economists leading calls for more homebuilding to solve the inventory shortage, told NPR that home builders haven’t been building enough homes for more than a decade now.
“We need to build more homes,” Yun told NPR.
The shortage of homes for sale, added to the strong demand from buyers since the COVID-19 pandemic emerged, has pushed up the prices of homes rapidly in the last year. The median existing-home price for all housing types in February was $313,000, up almost 16% from a year ago, Khater said. The shortages are most keenly felt in the market for entry-level homes, and that is making it incredibly difficult for first-time buyers to buy their first piece of real estate, he added.
In its analysis, Freddie Mac said it calculated the almost 4 million home shortfall by factoring in the amount of single-family home building that’s needed to meet the demand from household formation, second-home purchases and replacement of damaged or aging homes. Freddie Mac’s researchers than compared that data to the pace of construction to try and gauge the level of demand.
The homebuilding decline dates back to the Great Recession that lasted from 2007 until 2009, the Journal said. Following that period, which saw millions of homes foreclosed upon and repossessed, builders refused to step up their construction of new homes. Only in the last year or so have builders stepped up construction, but they have faced challenges including a shortage of lots, labor and appliances, as well as the rising costs of building materials.
National Association of Home Builders’ chief economist Robert Dietz told the Journal that builders would need to construct between 1.1 million and 1.2 million homes each year in order to meet current demand, and even more than that in order to reduce the existing deficit.