Lawrence Yun, writing on Realtor.com, said that the national inventory shortage was driving prices up for both homeowners and renters.
“Rents rose at their highest pace in seven years and home prices nationally increased by 6 percent,” Yun wrote. “That would be three times the pace of average wage growth. Housing costs are expected to keep rising in 2016 simply because not enough homes are being built.”
Since 2009, new construction of single-family homes, condos and apartment units totaled 5.6 million, Yun wrote. During the same period, 1.7 million housing units were demolished after being deemed obsolete or uninhabitable.
“These two figures result in a net addition of 3.9 million housing units to the country’s stock,” Yun wrote. “Is that adequate in light of 17.3 million additional people living in the country over the same period?
“Clearly, the answer is no. Given the average household size of 2.5 persons, a total of 6.9 million new housing units would be needed to accommodate the country’s rising population. The 3.9 million units that were actually created fall far short of the demand—by some 3 million homes.”
If home builders don’t start adding inventory at a faster pace, Yun wrote, the outlook for prospective homeowners – especially young ones – could be grim.
“There are essentially two major consequences of a persistent housing shortage: a continuing steep rise in housing costs and people needing to double or triple up to afford a home,” he wrote.” Young adults may have to find multiple roommates or else live with their parents.
“That latter scenario is probably not what most young people dream about, but it’s what the American dream of home ownership could turn into if we don’t spur more housing development in the country soon.”
Inflation may not be a problem, but inventory shortages are still causing real problems for housing affordability, according to the National Association of Realtors’ chief economist.