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Despite an Ever-Widening Housing Shortage, Builders Slow Their Pace of New Construction

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Market Data + Trends

Despite an Ever-Widening Housing Shortage, Builders Slow Their Pace of New Construction

The U.S. needs to add more than 1 million new housing units to chip away at a worsening supply deficit, but housing starts are expected to slow in the year ahead

February 1, 2023
Newly framed single-family house under construction
Image: Stock.adobe.com

Despite a decades-old housing shortage exacerbating an affordability crisis in the rental and for-sale markets, housing starts are expected to fall to about 744,000 single-family homes in 2023 as builders slow their pace of development. Builders are currently facing a deficit of about 1.5 million homes, but demand is dwindling in the wake of soaring mortgage rates, Realtor.com reports. 

Luckily, home prices are expected to drop by as much as 15% peak to trough in 2023, and as inflation slows, so too will the Fed’s aggressive rate hikes.

“Typically, single-family construction tends to recover before the economy rebounds,” says NAHB Chief Economist Robert Dietz. “By the time we get to the second part of the year, we should see brighter economic conditions.”

“The fundamental challenge to housing remains a lack of homes for sale,” says Dietz. “So when affordability improves, that will create demand for new homebuilding.”

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