Just How Badly Is Housing Demand Outpacing Supply?

As demand continues to grow and new households are formed, supply continues to struggle to keep up

June 17, 2016

In 2015, Redfin estimates that there were more than one million new households formed, but the number of new homes that were completed was just 620,000. This created a shortage of 430,370 units. Building around six homes for every 10 households that are created is a huge factor in the massive increase in home prices and rents, and it is a trend that doesn’t seem like it will be changing anytime in the near future unless some large policy revisions are implemented.

While single-family starts and completions are above their post-crisis lows, they are still nowhere near the levels seen between 1968 and 2008. Even multifamily housing, which is better, is still far below the historic levels. 2015 saw 968,000 multifamily housing completions, but that number was over one million units annually from 1968 to 2008.

While builders are starting more houses, and supply will eventually begin to catch up to demand, it may be a few years before that happens, even with flat household formation, but odds are household formation will continue to grow as Baby Boomers are living longer and Millennials are finally beginning to head out and form their own households.

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