It’s Bumpy Times for Our Nation's Housing Stock

Want to buy a home? Get in line—a long one. Part of the problem has been the pandemic and people hunkering down, not moving out of their existing digs. Another part, according to the National Association of Realtors and other experts, has been a sluggish pace of building new housing.

In its sponsored report, “Housing is Critical Infrastructure: Social and Economic Benefits of Building More Housing,” the organization notes that housing construction has fallen far from its traditional pace: “While the total stock of US housing grew at an average annual rate of 1.7% from 1968 through 2000, the US housing stock grew by an annual average rate of 1% in the last two decades, and only 0.7% in the last decade.”

As home construction has lagged, the population has grown, albeit at a significantly slowing pace since 2015, when the year-over-year expansion was 0.74%, according to the most recent national population estimates by the Census Bureau. In 2019, the rate was down to 0.46% and, in 2020, 0.35%.

The pandemic set off a sharp drop in home ownership. Still, the 2021 Q1 figure is 65.6%, well within recent historical levels.

The drop is likely also tied to the pandemic and people not moving out of one home into another.

Given all this, it is fair to wonder if there is an immediate potential for the US turning into a “renter nation?” Certainly, the lack of building is an issue and changes in markets raise questions of what the future will bring.

“If you just look at the housing inventories, certainly right now the situation is very tight,” N. Kundan Kishor, a professor of economics at the University of Wisconsin at Milwaukee, tells GlobeSt.com. “If you look at the housing start numbers, they recovered after the 2008 crisis, but they never went back to the 2006 levels.”

That has led to chronic shortages that have been building over the last 15 years. The pandemic built upon those problems and drove ownership downward with the cost of materials, labor shortages, and the upward surge of prices. The national median home price crossed the $350,000 mark in May for the first time, according to the NAR. That was up 23.6% from May 2020. The figures make it increasingly difficult, at least for now, for millions to afford a down payment or meet the resulting monthly mortgage.

One result, an immediate upshot of demand for rentals. “We recently brought a new ground up construction 112-unit project to the rental market in suburban Chicago, projecting an 18 month lease up to stabilization,” Michael Zaransky, managing principal of MZ Capital Partners, tells GlobeSt.com. “Instead, we were one hundred percent leased, with no vacancy, in three months’ time.”

“We have all the millennials wanting now to start families and buying homes but it’s still lagging,” says Mel Jones, a research scientist with the Center for Housing Research at Virginia Tech. “We’re increasing the rate of building but not clearing up the backlog. We really need lots of investment in housing right now.”

For the time being, housing prices look as though they’ll continue to rise, which means growth in renting is probably far from over.