US Faces Critical Housing Shortage: Key Issues Explained

The United States is muddled in a severe housing shortage, with existing home inventory plummeting to just 3.8 months, significantly below the normal six months. Builders completed over 1.5 million new housing units in the year ending July 2024, yet this fell short of remedying a decade-long housing shortfall estimated between 2 to 20 million units. The pandemic-driven demand surge drove home prices upwards, with average costs hitting around $417,000, while the median household income stagnated at only $75,000 annually in 2022. Regions like Texas and Florida have emerged as population magnets due to their lower living costs. The Federal Reserve's monetary policies have helped exacerbate the issue, pricing millions out of homeownership with rising mortgage rates. Additionally, the housing market remains heavily consolidated with major builders controlling over half of new home sales, further stifling competition. With both major political parties proposing solutions, including subsidies and tax incentives, the crux of the issue still lies in promoting fair competition among builders and making land available for construction to boost housing supply. The anticipated changes in regulatory approaches by future administrations could shape the trajectory of the housing market amid the pressing demand.