Why The U.S. Can’t Build Homes Fast Enough
October 1, 2024
Under-Building and High Demand: The U.S. has been under-building for over a decade, which was exacerbated by a surge in housing demand during the pandemic. This has led to a persistent housing shortage.
Current Housing Market: As of July 2024, builders completed over 1.5 million new housing units, but this was not sufficient to end the housing shortage. The existing home inventory increased to 3.8 months, whereas the normal level is six months. Home prices have been driven up by this lack of supply.
Economic Impact and Affordability: The typical newly built home in the U.S. cost about $417,000 in June 2024. However, the average household income was around $75,000 in 2022, which means many households are priced out of the market. As a result, there is a migration trend of consumers moving to states with a lower cost of living, like Texas and Florida.
Market Concentration and Competition: The market is highly concentrated, with the top 10 builders accounting for more than half of the new homes in many regions. This concentration gives large builders significant market control, making it difficult for smaller builders to compete. Furthermore, big builders often have their own mortgage companies, allowing them to offer favorable terms that smaller builders cannot.
Regulatory and Economic Challenges: Rising mortgage rates and economic tightening have also slowed down the development of new housing. The Federal Reserve’s policies and the economic environment are significant factors in the real estate cycle.
Antitrust and Competition Policies: The video mentions the role of antitrust regulations and the government's approach to mergers in the housing market. Under the Biden administration, there has been a focus on promoting competition, whereas different approaches could be seen under future administrations.
Proposed Solutions: Both 2024 presidential candidates have ideas to address the housing market issues, but there is a debate on the effectiveness and focus of these policies, especially concerning competition and market dynamics.