Housing inventory crunch could persist for years: Freddie Mac
The gap between supply and demand in the housing market is contributing to affordability constraints that are likely to limit homeownership long-term, according to Freddie Mac.
"From 1968 to 2008, a span of 40 years, there was only one year in which fewer new housing units were built than in 2017 — and this despite rising demand in a growing economy," Sam Khater, chief economist at Freddie Mac, said in a press release. "We estimate that over the next decade, young adults will add about 20 million households — and those households will need a place to live. Until construction ramps up, housing costs will likely continue rising above income, constricting household formation and preventing homeownership for millions of potential households."
In 2017, the annual rate of construction was 1.25 million. But long-term housing demand calls for annual production of 1.62 million units, according to Freddie Mac's estimates.
The market needs an estimated 1.1 million units annually to accommodate household growth, 300,000 units to replace existing housing stock that has depreciated, 120,000 vacant homes "to maintain an efficient marketplace" and 100,000 units to meet demand for second homes, according to Freddie Mac.
In addition to low building levels due to shortages of skilled labor, factors that continue to contribute to the housing crunch include the propensity of homeowners 55 and older to age in place, the report noted.
Currently, young adults make up a large share of the first-time homebuyer population, Freddie Mac noted. The median age of first-time homebuyers is 31.