The Real Estate Market Is 3.3M Homes Short, Study Says
March 3, 2020
Many home buyers are having a tough time finding a home they want, and the problem will likely get worse. A new study by Freddie Mac puts the housing shortage in a dire perspective: a 3.3 million unit deficit nationwide.
Years of underbuilding has created an inventory shortfall, which is most pronounced in states with strong economies that have been luring more people to move for jobs, Freddie Mac’s latest Insight report notes.
“Simply put, new housing supply is not keeping up with rising demand,” says Sam Khater, Freddie Mac’s chief economist. Freddie Mac’s report says the housing shortage is rising by about 300,000 units a year. “More than half of all states have a housing shortage, and the shortage is no longer concentrated in coastal markets but is spreading to the middle of the country, in more affordable states like Texas and Minnesota,” Khater adds.
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Those interior states as well as others, such as Colorado, are now feeling the crunch and need to build more housing units to accommodate areas growing in population. “Domestic migration is worsening the housing shortage issue in some states,” the report notes. “In pursuit of new opportunities in states with stronger economies, people have migrated from states with surplus housing like West Virginia, Alabama, and North Dakota, to states with housing deficits, putting pressure on high-growth states.”
The Freddie Mac report estimates 29 states have a housing supply deficit, and the shortfalls are driving up home prices in areas where inventories are the tightest. The states with the highest deficits are Oregon, California, Minnesota, Florida, Colorado, and Texas.
“We are in the midst of a demographic tailwind, and we expect home purchase demand will remain strong well into the next decade as the peak cohorts of millennials turn thirty years of age in 2020 and beyond,” Khater says. Freddie Mac predicts the housing shortages to worsen, too, as millennials and Generation Z enter the housing markets to form their own households over this decade. That will prompt home prices to continue to rise, the report notes.Source: Freddie Mac