The state of the U.S. housing market has been one of the defining economic stories of the past two and a half years. Since the beginning of the COVID-19 pandemic, housing has become more expensive for both buyers and renters. Despite recent price drops, both home prices and rental prices remain roughly 30% higher than before the pandemic.
Inadequate housing supply has been a key factor contributing to issues with housing affordability in the U.S. for years. Federal mortgage backer Freddie Mac estimates that the U.S. has a 3.8 million unit shortage of housing. But the pandemic only exacerbated the issue of supply. Housing inventory fell to record lows in 2020. The shift to working, schooling, and socializing from home increased preferences—and competition—for larger, single-family homes among both buyers and renters. In addition, ongoing supply chain challenges and labor shortages have made it difficult for builders to add new stock: building permits and housing starts rose significantly in 2021 and 2022, but completions failed to keep up. And now with higher interest rates, building permits have again declined back to 2019 levels.
Read the full article here