Remote work, COVID-19 pandemic migrations, and more investors are causing a housing shortage that's stopping potential homebuyers from accessing the American dream.
The nation has a shortage of 6.5 million homes, according to a Realtor.com analysis—the result of a nearly decadeslong construction slowdown following the Great Recession. Still, this year, home sales are on track to be at the lowest level since 2008, when the housing bubble burst, according to Redfin.
"It's an affordability issue," Haydar Kurban, Ph.D., director of Howard University's Center of Excellence in Housing and Urban Research, told Stacker. "People cannot find housing with the prices that they can afford."
The pandemic ushered in more Americans working from home, creating the need for employees to have homes with enough space to function as offices. These workers expanded their home searches beyond pricey urban centers and settled in more affordable cities with attractive amenities—the leading reason for home prices increasing 24% between November 2019 and 2021.
Not only are home prices at record levels, but mortgage rates currently hover near 8% after rising two full points in 2023. Even 1 percentage point can increase a monthly payment by hundreds of dollars. Most American homeowners (63%) need mortgages to purchase homes.
Also adding to the housing shortage and competitive market is the influx of investors looking for potential Airbnbs, flips, and rental properties. Investors bought a record high of "18.4% of the U.S. homes that were purchased in the fourth quarter" of 2021, according to a Redfin study.
Belong crunched Labor Department and Census data to find out which metros are having the biggest housing shortages.
Shortages were determined by calculating the number of new homes being built for every new job added. Generally, one new housing unit should be built per new job to maintain a balanced housing market. Ratios were determined by dividing the number of jobs added between August 2022 and August 2023 by the number of building permits issued from January to August 2023.
