The Property Line: Housing Shortage Hangs On; Price Crash Unlikely

The housing shortage is blamed on factors including regulations and lack of workers. No need to fear a crash, but fixes won't be easy.
Holden Lewis
By Holden Lewis 
Updated
Edited by Beth Buczynski

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If for-sale signs in front yards were creatures, they would have the life span of fruit flies.

Among homes sold in March 2021, 83% had been on the market for less than a month. Homes sell fast because there aren't enough to accommodate every household that wants to own one. The shortfall was 3.8 million units at the end of 2020, according to an April 2021 blog post by Sam Khater, chief economist for Freddie Mac.

How housing got here

To visualize this shortfall, picture the national real estate market as a game of musical chairs, with a twist: A chair is added to the circle each time 1 million homes are built, and a new player dances into the room each time 1 million households are formed due to population growth. From 2007 to 2020, the number of chairs grew from 130 to 141. But if Khater's math is right, about 145 chairs were needed to meet demand.

"This is a result of homebuilders having been underproducing for multiple years — not this year, but for the past 13 years," Lawrence Yun, chief economist for the National Association of Realtors, says.

The housing shortage has led to dashed hopes. Among would-be home buyers who had been searching for at least three months in early 2021, 45% hadn't bought a house because "they continue to lose out in bidding wars," according to research by the National Association of Home Builders.

The result is rapidly rising house prices. The median price for an existing home rose 17.2% in the 12 months ending in March 2021, to $329,100, according to the NAR. At March's sales pace, only a 2.1-month supply of homes was available, near a record low.

Not only are for-sale signs short-lived, they're also an endangered species.

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