2 reasons why the United States has a housing shortage and prices are so high

  • The United States has a severe housing shortage, which means that what is available is not affordable.
  • There are two reasons the United States hasn’t built enough homes to keep up with demand.
  • Material delays make planning projects inconsistent, making it difficult to retain workers.

The United States is in the midst of a severe housing shortage — and it’s even harder for Americans to afford a home.

Conditions do not appear to be improving.

According to the Census Bureau, building permits for new residential construction fell to a five-month low in April.

Much of this decline was in single-family homes, while spring demand from homebuyers helped push home prices up 15.5% year-over-year to a median sale price of 424 $405.

“Builders still have a backlog of unfinished homes before they can start new projects,” Odeta Kushi, America’s first deputy chief economist, told Insider, pointing out that the number of single-family homes approved for construction but not started is up 8.5% since this time last year, according to census data.

As housing inventory continues to fall short of the 1.5 million homes now needed to meet historically high demand, President Joe Biden announced an initiative to address the crisis. The White House is proposing to use federal dollars to boost the supply of affordable housing. While the move could be a step in the right direction, experts say more will have to be done to attract workers to the homebuilding industry and drive down the prices of supplies – the two main areas behind shortage of available housing in the country.

“President Biden’s plan to address housing affordability challenges is a welcome development, but the administration needs to focus more on addressing rising lumber and building material prices and supply bottlenecks. supply chain bottlenecks that are driving up housing costs much faster than wages,” NAHB president Jerry Konter said in a statement.

Building materials are hard to come by – and they’re also very expensive right now

In 2021, more than 90% of builders reported delays and material shortages, according to NAHB. As home builders struggle to find basic materials like wood or steel, this delays and increases the price of construction projects.

“Material shortages are now more prevalent than at any time since NAHB began tracking the problem in the 1990s, with more than 90% of builders reporting shortages of fixtures, lumber and panels. oriented stranding,” the NAHB researchers wrote.

Even when builders get their hands on materials, the cost burns a hole in their wallet.

According to the Bureau of Labor Statistics, prices for goods used in residential construction have climbed 4.9% since the start of 2022 and 19.2% since this time last year. Overall, prices have risen 35.6% since the start of the pandemic – and they are expected to continue to rise.

Although the Biden administration moved to reduce tariffs on imports of Canadian softwood lumber, NAHB says the price spikes have added $18,500 to the price of an average new single-family home, while making drive up costs by nearly $8,000 for a multi-family home.

“Historically high price levels for wood and other building materials are significantly affecting house prices and rental costs and threatening the country’s economic stability,” Konter said in a statement, adding that price increases in supply chain have only aggravated the current housing affordability crisis.

Lack of building materials leads to labor shortage in construction

The United States cannot build more houses if there is no one to do the work.

At the start of the pandemic, the fear of the spread of this virus contributed to the delay of many construction projects. When construction stopped, thousands of construction workers were laid off or sought employment in other fields.

Supply chain bottlenecks have also “damaged the livelihoods” of workers in the construction industry, leading to notable job losses, according to scientific research publication IOP Publishing. After all, if workers don’t have materials, they can’t work – and that means they have to look elsewhere for a paycheck.

Although residential building construction employment has now surpassed 2020 levels, the industry still faces a chronic labor shortage. According to the Associated Builders and Contractors Association, the construction industry will need to attract nearly 650,000 additional workers on top of its normal rate of hiring in 2022. Additionally, the organization expects about 1 .2 million construction workers leave their jobs for other industries by the end of the year.

“The labor shortage is the most acute challenge facing the construction industry despite weak spending growth,” ABC’s chief economist Anirban Basu said in a statement.

The fewer construction workers there are to build houses, the longer it will take for the sector to increase its supply of housing. Although buyer demand has shown signs of slowing, the slower pace of construction is expected to keep house prices relatively high, which could mean that the imbalance between supply and demand will remain an inescapable element. of the US real estate market.

“A skilled and capable workforce that is adequate to meet our nation’s housing demand is vital for homebuilders,” the NAHB researchers wrote. “Despite competitive wages, the housing construction industry continues to experience labor shortages, impacting housing affordability.”

Leave a Reply