The U.S. housing market continues to face an affordability crisis due to a lack of homes for sale. A recent study by Realtor.com revealed a housing supply gap of 6.5 million single-family homes at the end of 2022. The shortage has driven up housing prices and made it difficult for prospective buyers to find affordable options. However, the situation may worsen in the coming months, according to entrepreneur and attorney Jaspreet Singh.
Singh cited a report from the National Association of Home Builders (NAHB) in a YouTube video, highlighting the low confidence among builders despite the high demand for housing. The combination of high mortgage rates and construction costs has made builders hesitant to initiate major developments. This hesitation can have detrimental consequences for the U.S. housing market.
The lack of new construction exacerbates the cycle of low inventory and high prices. As Singh stated, if homebuilders lack confidence in the housing market’s outlook and the profitability of selling new homes, they will be less likely to build. This perpetuates the housing supply shortage and keeps prices elevated.
The NAHB’s September report demonstrated the declining confidence among builders. Persistently high mortgage rates above 7% have eroded builder sentiment, dropping it into negative territory. The NAHB/Wells Fargo Housing Market Index showed a 5-point decline in builder confidence for newly built single-family homes in September. Readings below 50 indicate negative sentiment.
High mortgage rates have a dual impact on the housing market. First, potential buyers are deterred from purchasing homes due to the increased costs. Second, existing homeowners are reluctant to sell their homes because they would face higher mortgage rates if they were to buy a new property. Singh emphasized that homeowners prefer to stay in their homes with lower mortgage rates, contributing to the cautious approach of home builders.
To alleviate the affordability crisis and combat the housing supply shortage, policies need to be implemented to support increased housing supply. The current situation calls for lower mortgage rates and reduced construction costs to encourage builders to take action. Without these measures, the U.S. housing market may continue to struggle with high prices and limited inventory.
Source:
– Realtor.com
– National Association of Home Builders