WASHINGTON—What is needed to keep the U.S. housing market thriving over the next decade has been outlined in CUNA’s latest Economic Update.
“By conservative estimates we need 1.72 million homes per year for the next 10 years,” wrote Senior Economist Dawit Kebede, adding that a Federal Reserve estimate shows the need for three million homes over that time period. “But even with this conservative estimate here is still a huge gap between this number of houses that we need every year and the number of new permits that we see, for example, which is 1.52 million in August. This is down 14.4% from a year ago.
Kebede further noted affordable housing supply is not matching population growth, a trend that has been going even pre-pandemic.
“This is exacerbated by an increase in household income and low interest environment during the pandemic, leading to unusually high price increases in the last two and a half years,” according to Kebede.
Other Considerations
Kebede said there have also been reduced profit margins in the housing construction market due to:
- Cost of land increasing to 55% of the total price of the nation’s median home price, and higher in some places like Seattle (70%)
- Tightening of construction financing, especially for smaller financial institutions that serve small builders. Those builders are generally active in affordable housing construction
- A rise in cost of construction materials
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