After more than a decade of underbuilding relative to population growth, there's an overwhelming shortage of new homes compared with the number of people setting up households, according to a new analysis from Realtor.com.
The gap between single-family home constructions and household formations grew to 6.5 million homes between 2012 and 2022. However, this figure overstates the housing shortage, since new multi-family homes offer options both to buyers and renters. If multi-family construction is included — which is predominantly rental units — this gap is cut to 2.3 million homes.
In the decade between 2012 and 2022, 15.6 million households were formed. During the same time period, 13.3 million housing units were started, and 11.9 million were completed. This includes 9.03 million single-family homes and 4.2 million multi-family homes. Of those, only 8.5 million single-family homes and 3.4 million multi-family homes are completed.
In the second half of 2021, single-family homes were being both started and completed at the fastest pace in the last decade. The first part of 2022 continued the previous year’s trend until mid-year, when mortgage rates surged as part of the Federal Reserve’s historic campaign to rein in inflation. The housing market felt the impact of the ascent of mortgage rates, red-hot buyer demand cooled and builders started to pull back on single-family home starts.
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