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Tight Housing Market Causes Supply Issue

Housing Markets

Tight Housing Market Causes Supply Issue

Some analysts say too many houses are being built— homebuilders disagree.

October 13, 2021
Money, a calculator, and model homes on a table

A discrepancy between population decline and building rates for single-family and multi-family homes is generating greater market competition and driving up prices for house hunters. 

Though market analysts and homebuilders seem to disagree on the necessary output of new homes, the current supply is simply not meeting a rising demand according to the National Association of Realtors.

The supply of homes for sale at the end of August totaled 1.29 million units, down 1.5% from July and down 13.4% from August 2020, according to the National Association of Realtors. That represents a 2.6-month supply at the current sales pace, which is one of the lowest supplies on record.

“The market is too hot. There is just a massive amount of capital that’s coming to the space,” Zelman said, referring to the investor interest in the housing market. 

“The challenge now is that we have the supply-side limitations, including lack of building materials and a growing shortage of skilled workers, plus higher home prices relative to incomes,” said Dietz.

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