What does a strong housing market mean to America? That answer depends on whether you already own the roof over your head or are locked in a sub-2% interest rate on your mortgage. But ask most Americans, and they’ll admit that many no longer think homeownership is within reach. Today’s housing situation looks dire — and although it’s not the same as the Great Financial Crisis of 2007-08, many are calling today’s shortage a crisis of its own.

A different kind of housing crisis: Since the GFC, the US has built significantly fewer homes. In fact, fewer new homes were constructed in the 10 years after the GFC than in any decade since the 1960s. Over that same period, the US population ballooned by 39M people, creating a significant housing deficit relative to population demand. Today, America is short about 3.2M homes — creating a great housing market that works for some while the rest of the country is left out.

• Since the start of the pandemic, the average selling price of houses has risen from $383K to $501K — over a 30% increase — coupled with higher financing rates.
• Both factors have pushed prices out of reach for young people and lower- and middle-income buyers, with the NAR reporting that the median age for first-time homebuyers has risen to 38, up from 35 last year.

Complex Problems Call for Complex Solutions

America has spent years litigating whether more dwellings is the answer to its housing shortage — during which homelessness worsened, local governments suffered, and many Americans simply left for cheaper pastures. Thankfully, progress has been made despite development difficulties. This year saw a record number of multifamily units completed, and homebuilding continues to grow. But meeting housing demand requires complex solutions.

• To make homes more affordable, starter homes built by homebuilders are getting smaller. An analysis by Apollo found that the median number of new single-family homes has shrunk by 12% since it peaked in 2016.
• Some developers, like Greystar, are even testing out modular homes, a subset of prefabricated construction that has been shown to help overcome traditional development delays.

Other solutions: Analysts agree that increasing the amount of quality housing — whether apartments, single-family homes, or other modalities — is an important ingredient in increasing access and affordability. Some regions, like Seattle, have relaxed housing regulations — and further easing of rules could further spur housing production. It’s hard to believe that the world’s richest country can’t have it all when it comes to housing. It absolutely can — somebody just has to find a way to make it profitable.