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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 Senior Writer/Spokesperson | Mortgages, homebuying
Holden Lewis is a mortgage reporter and spokesperson who joined NerdWallet in 2017. He previously wrote for Bankrate, where he wrote about mortgages and real estate during the housing boom and bust. He has written articles about mortgages since 2001, and enjoys explaining complex topics to regular people who don't buy houses every day. Holden has been president of the National Association of Real Estate Editors and has won numerous writing awards. He splits his time between Jupiter, Florida, and Fort Worth, where he is renovating the house where he spent his high school years so he can move back and be a Texan again.
Beth Buczynski Lead Assigning Editor | Mortgages, owning a home, dealing with debt
Beth Buczynski is a lead assigning editor on the international expansion team at NerdWallet. Beth works with writers and editors to bring financial clarity to readers across Canada's 10 provinces and three territories. Previously, Beth spent four years covering mortgages and homeownership for NerdWallet, first as a writer and later as an editor. As a writer, Beth's work was featured by The Associated Press, The Washington Post and Money magazine, among others. Beth holds a master’s degree in public communication from Colorado State University.
Some or all of the mortgage lenders featured on our site are advertising partners of NerdWallet, but this does not influence our evaluations, lender star ratings or the order in which lenders are listed on the page. Our opinions are our own. Here is a list of our partners.
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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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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
500500
Min. down payment
3.5%New American Funding works with down payment assistance programs in 14 states, including California, Texas, Florida and Illinois.
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
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620620
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3%NBKC offers conventional loans for as little as 3% down.
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
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580580
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3.5%First-time home buyers may qualify for 3% down mortgages at Rocket.
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
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620620
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0%Veterans United offers VA loans for as little as 0% down.
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
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3%Better offers 3% down payments on conventional loans.
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
620620
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0%On VA loans, NBKC offers down payments as low as 0%.
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
620620
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3%Guaranteed Rate offers conventional loans with as little as 3% down.
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
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580580
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3.5%First-time home buyers may qualify for 3% down mortgages at Rocket.
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
500500
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3.5%New American Funding works with down payment assistance programs in 14 states, including California, Texas, Florida and Illinois.
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
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620620
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0%Veterans United offers VA loans for as little as 0% down.
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
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620620
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3%Rocket Mortgage offers conventional mortgages with as little as 1% down.
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
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620620
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3%NBKC offers conventional loans for as little as 3% down.
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
620620
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3%Guaranteed Rate offers conventional loans with as little as 3% down.
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
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580580
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3%New American Funding works with down payment assistance programs in 14 states, including California, Texas, Florida and Illinois.
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
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580580
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N/ANew American Funding works with down payment assistance programs in 14 states, including California, Texas, Florida and Illinois.
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
4.0
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
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580580
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N/ANew American Funding works with down payment assistance programs in 14 states, including California, Texas, Florida and Illinois.
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4.5
NerdWallet rating
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
500500
Min. down payment
3.5%New American Funding works with down payment assistance programs in 14 states, including California, Texas, Florida and Illinois.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
620620
Min. down payment
3%NBKC offers conventional loans for as little as 3% down.
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
580580
Min. down payment
3.5%First-time home buyers may qualify for 3% down mortgages at Rocket.
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
620620
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0%On VA loans, NBKC offers down payments as low as 0%.
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
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620620
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3%Guaranteed Rate offers conventional loans with as little as 3% down.
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
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580580
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3.5%First-time home buyers may qualify for 3% down mortgages at Rocket.
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
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620620
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3%Rocket Mortgage offers conventional mortgages with as little as 1% down.
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
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620620
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3%NBKC offers conventional loans for as little as 3% down.
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
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620620
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3%Guaranteed Rate offers conventional loans with as little as 3% down.
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
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580580
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N/ANew American Funding works with down payment assistance programs in 14 states, including California, Texas, Florida and Illinois.
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
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580580
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N/ANew American Funding works with down payment assistance programs in 14 states, including California, Texas, Florida and Illinois.
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4.5
NerdWallet rating
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
The housing shortage sprang from numerous factors. Robert Dietz, chief economist for the NAHB, blames the shortfall on "the five Ls":
Lack of skilled labor.
Not enough developed lots to build on.
The cost of loans to finance construction.
Prices for lumber and other materials.
Laws and regulations.
That last item includes zoning and building codes, labor laws, requirements to set aside green spaces in developments, and "things like exclusionary zoning that requires a minimum lot size, forcing buyers to buy more land than they otherwise would," Dietz says.
Dean Baker, senior economist for the Center for Economic Policy and Research, isn't convinced that zoning bears much of the blame. "We didn't suddenly get much more restrictive in say 2010, 2011, 2012, than what we had in 2004, 2005, 2006, when we were building 2 million units a year," Baker says. "So I don't think zoning explains the change." He believes that builders underbuilt because they became cautious after the 2008 housing crash.
Will the housing market crash again?
In 2005, I was a reporter, and I wondered whether we were in a housing bubble. Most housing economists told me we weren't. Baker was the exception. He was so sure we were in a housing bubble that he sold his condominium in 2004 and rented a place, confident that he could use the proceeds of his condo sale to snag a bargain after prices fell. Less than three years after he sold the condo in the District of Columbia, prices there began falling.
If you fear that history will repeat, take this as comfort: Baker and I correctly thought we were in a housing bubble in 2005, but neither of us thinks we're in a bubble this year.
We don't think home prices will crash, but they could get involved in a fender-bender. The 30-year mortgage has been below 3.5% since April 2020. Baker says: "What happens when the mortgage rate goes to 4%, which is not high by any historic standard? Will prices fall? My guess is probably yes. It wouldn't be a crash, but there would be downward pressure on prices."
“Prices are rising rapidly because demand exceeds supply, not because buyers are out to make a quick buck.”
Today's housing landscape is different from the early years of the century. The housing bubble started in 2003, fueled by inadequate mortgage-lending standards and greed. Flippers were buying homes as short-term investments on the belief that prices would keep going up. But nowadays, regulators enforce stricter lending standards, and the homebuying mentality has changed. Prices are rising rapidly because demand exceeds supply, not because buyers are out to make a quick buck.
Who loses in a housing shortage?
Economists have an easier time identifying who is harmed by the hot housing market than identifying who gains from it.
"These high housing costs have hit the millennial generation particularly hard," Freddie Mac's Khater wrote in a February 2020 blog post. "To overcome these cost barriers, some young adults have turned to shared living arrangements. Others have moved back home with parents. As a result, there are more than 400,000 missing households headed by 25- to 34-year-olds (households that would have formed except for higher housing costs)."
“These high housing costs have hit the millennial generation particularly hard.”
Sam Khater, chief economist, Freddie Mac
Dietz, of the NAHB, says some economists speculated six or seven years ago that millennials weren't interested in homeownership. That wasn't the case. "People really confused a lack of means with a lack of wants," Dietz says. Millennials wanted homes in 2014 and 2015, but couldn't afford them because of sluggish wage growth and student loan debt.
Now those same millennials are further into their careers and earning more, and mortgage rates are historically low, but there aren't enough homes to go around. "It is a frustrating market," Dietz says.
Who gains from a housing shortage?
If the hot real estate market frustrates millennials, who does it satisfy? Homeowners may get warm feelings from tracking home values online. Sellers may feel contentment when collecting offers and anxiety when making offers on their next home.
Then there are landlords. In 2007, before the housing bust, there were just under 11 million single-family homes occupied by renters, according to the Census Bureau. In 2019, the latest data available, there were a little more than 15 million. Many of the 4.1 million additional single-family rental homes were houses bought by investors when prices plunged in the housing crash.
By renting out these houses instead of selling them, are landlords denying would-be buyers the pleasure of owning instead of renting?
"On the one hand, there's certainly the argument that buyers of single-family homes, with intent to rent them out, take affordable housing stock out of the market that would otherwise be bought by a family," says Michael Neal, senior research associate for the Urban Institute. "But at the same time, these buyers helped to stabilize the housing market in a situation in which demand largely had been placed on the sidelines."
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
500500
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3.5%New American Funding works with down payment assistance programs in 14 states, including California, Texas, Florida and Illinois.
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
620620
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3%NBKC offers conventional loans for as little as 3% down.
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
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580580
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3.5%First-time home buyers may qualify for 3% down mortgages at Rocket.
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
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620620
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0%Veterans United offers VA loans for as little as 0% down.
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
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620620
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3%Better offers 3% down payments on conventional loans.
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
620620
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0%On VA loans, NBKC offers down payments as low as 0%.
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
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620620
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3%Guaranteed Rate offers conventional loans with as little as 3% down.
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
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580580
Min. down payment
3.5%First-time home buyers may qualify for 3% down mortgages at Rocket.
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
500500
Min. down payment
3.5%New American Funding works with down payment assistance programs in 14 states, including California, Texas, Florida and Illinois.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
620620
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0%Veterans United offers VA loans for as little as 0% down.
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
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620620
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3%Rocket Mortgage offers conventional mortgages with as little as 1% down.
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
620620
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3%NBKC offers conventional loans for as little as 3% down.
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
620620
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3%Guaranteed Rate offers conventional loans with as little as 3% down.
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
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580580
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3%New American Funding works with down payment assistance programs in 14 states, including California, Texas, Florida and Illinois.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
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580580
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N/ANew American Funding works with down payment assistance programs in 14 states, including California, Texas, Florida and Illinois.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
4.0
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
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580580
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N/ANew American Funding works with down payment assistance programs in 14 states, including California, Texas, Florida and Illinois.
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4.5
NerdWallet rating
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
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500500
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3.5%New American Funding works with down payment assistance programs in 14 states, including California, Texas, Florida and Illinois.
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
620620
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3%NBKC offers conventional loans for as little as 3% down.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
580580
Min. down payment
3.5%First-time home buyers may qualify for 3% down mortgages at Rocket.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
620620
Min. down payment
0%On VA loans, NBKC offers down payments as low as 0%.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
620620
Min. down payment
3%Guaranteed Rate offers conventional loans with as little as 3% down.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
580580
Min. down payment
3.5%First-time home buyers may qualify for 3% down mortgages at Rocket.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
620620
Min. down payment
3%Rocket Mortgage offers conventional mortgages with as little as 1% down.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
620620
Min. down payment
3%NBKC offers conventional loans for as little as 3% down.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
620620
Min. down payment
3%Guaranteed Rate offers conventional loans with as little as 3% down.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
580580
Min. down payment
N/ANew American Funding works with down payment assistance programs in 14 states, including California, Texas, Florida and Illinois.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
4.0
NerdWallet rating
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Min. credit score
580580
Min. down payment
N/ANew American Funding works with down payment assistance programs in 14 states, including California, Texas, Florida and Illinois.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
4.5
NerdWallet rating
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Khater writes in an April 2021 blog post: "Simply put, we must build more single-family entry-level housing to address this shortage, which has strong implications for the wealth, health and stability of American communities."
But how do we build more entry-level (in other words, relatively inexpensive) houses? Economists suggest relaxing zoning codes to give builders the flexibility to construct denser housing — think smaller lot sizes and multistory, multiunit buildings. The Biden administration has proposed giving grants to local governments that revise zoning codes.
Neal suggests fixing the labor shortage by connecting community colleges with builders to develop skills and by rethinking immigration policy.
There's a more direct solution to the market's failure to build enough houses: Have the federal government subsidize the construction of entry-level houses for sale to owner-occupants. This solution would result in more homes for millennials to buy. It also would let younger homeowners build wealth instead of transferring it to older landlords in the form of rent.
The Biden administration has asked Congress to allocate $20 billion in tax credits over five years to build or rehabilitate around 500,000 houses for lower-income home buyers. The plan is called the Neighborhood Homes Investment Act and the money would pay the difference between development costs and sale prices.
Half a million homes wouldn't eliminate the shortfall of 3.8 million dwellings, but it would be a start.