Short Supply will Continue to Drive Higher Prices

September 15, 2020
Short Supply
The US housing market would need to add about 1.6 million housing units a year to keep up with demand.

Much has been written about the current housing stock or lack thereof driving house prices. That dynamic probably won’t change anytime soon since it's a problem the US housing market has grappled with for some time now. Freddie Mac’s Chief Economist, Len Kiefer said that the US housing market would need to add about 1.6 million housing units a year to keep up with demand. Kiefer said that for years now he’s listened to loan officers and real estate agents talk about the housing stock issue and not just for hot markets but all over the US. Pre COVID-19 pandemic, 2019 marked the strongest year for housing construction in about a decade, according to Kiefer but he said: “We were still in recession levels of building in a lot of markets that were experiencing really strong job growth.” Add the pandemic induced hiatus in building and that creates a scenario where a year later when we get to Spring 2021, buyers show up, but they aren't going to have a lot of deliveries. “It's going to be hard for the US housing market to match 2019 production because of the lost spring but even if we were to outpace it we are still going to be well below replacement levels. That just adds more pressure on housing markets, and it shows up as higher home prices and more competition particularly among first-time buyers,” Kieffer said. Conclusion? From a housing supply perspective, expect to see another year or two of housing inventory continuing to tighten up.

Source: Rise and Shred