Here’s the NAR’s Claim in a 24-page PDF report.
The United States is in the midst of a severe housing shortage as a result of a persistent underproduction of housing during the last decade. From 1968 through 2000, the annual number of new housing units completed in the United States averaged 1.5 million. However, housing construction in the U.S. averaged only 950,000 new units from 2008 to 2020 and remained less than 1.3 million units in 2020, despite a recent, considerable increase in construction activity.
While the total stock of U.S. housing grew at an average annual rate of 1.7% from 1968 through 2000, the U.S. housing stock grew by an average annual rate of 1% in the last two decades and only 0.7% in the last decade, or less than half of the longer-term historical growth.
When compared with the long-term average (1968-2020), which includes the period of dramatic underbuilding immediately following the Great Recession, the shortfall in housing completions totaled 5.8 million housing units since 2008.
It is also critical to note that the underproduction of the last decade took place in all building types, especially smaller, two-to-four-unit multifamily buildings. From 2001 to 2020, the average gap in single family housing production was slightly more than 100,000 homes per year, when compared with the long-term average from 1968 to 2000, for a cumulative gap of approximately 2 million single family homes.
Cumulative 5.5 Million Gap
Housing Starts Single Family vs Multi-Family
Housing Shortage Crisis
I had already been working on the alleged housing shortage crisis before a reader emailed the above article.
I used cumulative housing starts per year dating back to 1959. The totals are yearly so the ending year in my chart is 2020.
Starts and completions are the same barring a tiny number of accidents so my chart matches the lead chart by the NAR except my chart goes back a little further in time.
2020 vs 1959
There were fewer new homes built in 2020 than 1959. Population adjusted, this seems to make little sense at first glance but houses last a long time.
Housing Starts vs Number of Households
Definition of Household
A household consists of all the people who occupy a housing unit. A house, an apartment or other group of rooms, or a single room, is regarded as a housing unit when it is occupied or intended for occupancy as separate living quarters; that is, when the occupants do not live with any other persons in the structure and there is direct access from the outside or through a common hall.
A household includes the related family members and all the unrelated people, if any, such as lodgers, foster children, wards, or employees who share the housing unit. A person living alone in a housing unit, or a group of unrelated people sharing a housing unit such as partners or roomers, is also counted as a household. The count of households excludes group quarters.
Starts and Households Since 2000
- 25,107 Total Starts
- 18,837 Single Family Starts
- 23,341 New Households
There were 25,107 starts and 23,341 new households. Starts were sufficient to cover households.
However, we do not know how many people wanted houses and did not get them. Nor do we know the numbers of houses that were torn down.
Starts and Households Since 2010
- 11,866 Total Starts
- 6,900 Single Family Starts
- 14,760 New Households
Interestingly, since 2010 the US added 14,760 households but only 11,866 new houses.
Given the definition of household, the above numbers may seem impossible.
The apparent conundrum has an easy explanation: There was a pool of existing houses sufficient to accommodate millions of new households.
Underbuild or Overbuild?
Did we underbuild since 2010 or overbuild from 2001 to 2008?
Both? Neither?
Always a Shortage at the Top
Amusingly, the NAR argued in 2007 that there was a shortage of houses. Clearly there wasn’t.
At every market peak, there always appears to be a shortage.
That does not imply this is the peak. Nor does it suggest anything about a shortage.
Why Are Prices Rising?
Some may ask “Why are prices rising unless there is a shortage?”
Prices are rising because of aggressive buyer demand.
It now takes >8 yrs of wages to buy a used home (!), 20% above the 50-yr norm. If this excess gets resolved via the numerator, we’ll have a housing bubble burst that could rival 2008. This is the Black Swan. If rates do back up, they’ll come crashing right back down again.
— David Rosenberg (@EconguyRosie) August 23, 2021
Why Are Buyers Aggressive?
- Cheap money from the Fed
- Free stimulus money from Congress
- A booming stock market bubble makes everyone feel wealthy
Let’s not confuse a genuine shortage with an artificial shortage due to monetary stimulus by the Fed and free money stimulus from Congress coupled with a booming stock market bubble.
If the Fed was not manipulating rates lower and openly encouraging speculation in assets, I bet there would not be the housing shortage.
Related Articles
- CPI Jumps Another 0.5% in July, 5.4% From a Year Ago (No Change)
- Consumer Inflation Expectations Hit a New 8-Year High
- Housing Starts Decline Another 7% to a Level Below the Pre-Pandemic Peak
Why are starts declining?
Some say it’s due to lumber prices and shortages. Another explanation is demand for houses by people who can afford them is falling.
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result of a persistent underproduction of housing during the last decade.”
New all time market highs today and the overnight crew has the premarket pumped for tomorrow. No news, no matter, stocks only go up.
Sounds like 2005-2006.