There are close to around 140 million houses in the United States of America, but as per a recent study, this is not at all adequate to meet the exhilarating demand. A Realtor.com study shows that there is a huge imbalance in supply against the demand of homes in the country, considering the number of people who want to become owners. It is estimated that they may need at least 5.5 million new homes to meet up with this demand. However, this shortage has not popped up overnight. Back in 2019, a report showed the shortage of about 3.8 million homes, but the housing market is red hot in 2022, and the demand is at an all-time high.
Bernshtam explains the reasons for the housing shortage
There are many reasons why this situation came with about 5 million homes supply shortages. Bernshtam pointsout a few major reasons:
- Increased formation of households – It is a known fact that the millennial generation population is the largest, and this young group is in their active years of household formation. Resulting of this huge demand, about 12 million households are formed new lately in the last decade, whereas only about 7 million new homes were only built in this period.
- Limited listings of homes for sale – It is to be noted that the 5.5 million shortage in houses also includes those that may end up being rented out. However, one major reason for this issue is the low supply overtime of homes for sale. Many states in the United States only less than a month’s inventory in the market, while ideally, six months of investment can only be considered as an ideal market scenario. The home price in the United States is also a soaring high over the past few years. So, the inventory is also worse at lower price points which the newly built households move towards.
- Disruptions in the supply chain – You can see that supply chain disruptions are very evident in the current economy. This also has a massive impact on the house building industry as all the essential materials, from construction materials to paint, have become largely expensive. There is also a scarcity of such items in the market.
- Shortage of labor – It is estimated that there are about 10 million jobs available for skilled workers in the construction industry, but with a significant scarcity in labor supply. As of late, the requirement is about 1.4 million more than the available pool of workers to take up the job. This is a significant labor shortage that is suffocating the housebuilding industry. The homebuilders and contractors fail to meet the high demand of the shortage of skilled workers.
As Bernshtam rightly points out, all these reasons are the biggest challenges of the times ending up in a notable supply crunch in the US apartment market. Many agencies and consortiums are trying to find practical solutions for the same, and these efforts may show reassuring results.