Real estate construction
(Photo : Maja Hitij) Real estate construction

Since the economy experienced the doomsday recession from 2007 to 2009, new homes' construction has been lagged since then. Fast-forward to 2021, and with the coronavirus global pandemic affecting the housing market, the shortage is rapidly piling up due to a surge of demand and housing prices increase.

The housing shortage is now seen as a threat to slow down the economy. That is why according to Freddie Mac chief economist Sam Khater, builders would now have to construct at least 3.8 million single-family homes to catch up with the demand and hopefuly end housing shortage.

Khater said that the housing shortage problem is highly affecting first-time buyers. Last year, builders only completed 65,000 entry-level homes while 2.38 million renters became first-time homebuyers.

"As we navigate our way through the year and get beyond the pandemic, we expect the housing supply shortage to continue to be one of the largest obstacles to inclusive economic growth in the U.S.," Khater wrote in a Freddie Mac report. 

"Simply put, we must build more single-family entry-level housing to address this shortage, which has strong implications for the wealth, health, and stability of American communities," he added.

Khater explained that two factors drive the continuous housing shortage, namely lack construction and lower existing supply.

"The main driver of the housing shortfall has been the long-term decline in the construction of single-family homes," Freddie Mac's Vice President for Economic & Housing Research said.

"That decline has resulted in the decrease in (the) supply of entry-level single-family homes or, "starter homes," he added.

(Photo : Image by Borko Manigoda from Pixabay )

Builders Confidence

Based on the data recorded by the National Association of Home Builders and Wells Fargo Housing Market Index, builders' confidence soared high as the COVID-19 situation eases. On a scale of 1 to 100, the builders' confidence only landed at 30 at the beginning of the pandemic but soared to 83 this month.

Builders' confidence is highest in the West with 92 percent but lowers in the Midwest at 72 percent. But according to the report, a confidence level reaching beyond 50 is considered a good market.

Meanwhile, a CNBC report concluded that the skyrocketing builders' confidence is brought by the vast buyer demand happening in the housing market these days. Especially now that the demand for newly-built houses is surging rapidly, which means homebuyers are looking into new real estate properties, which translates into business for those working in the industry.

Because of this, Market Watch suggests that homebuilders should expect to be very busy in the following months as demand for many new homes to be built will surely rise.

Additionally, many real estate market experts are expecting that the whole industry will be much tighter than before due to both demand and prices increasing at the same time. Both homebuilders and investors alike should be wary of that possible tightness to avoid running into potential future problems.

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