The Geographic Mismatch Between Housing Construction and Shortages

Abstract

Since late 2020, the largest wave of new construction in decades has been under way in both single-family and multifamily housing markets. This resurgence of home building was triggered by previous underbuilding, a severe pandemic housing supply shortage, and a "rate lock-in" effect limiting the number of existing homes for sale. Given the supply shock from this building boom, are U.S. housing markets still in a state of shortage or are they oversupplied?

As discussed herein, there is still a national housing supply shortage in the single-family housing sector, but there are signs of overbuilding in the multifamily sector. At the metropolitan level, there is a great geographic mismatch between where new homes are being built and where acute supply shortages still exist. As a result, housing markets in some metropolitan areas are still running hot, while single-family and multifamily markets in other metropolitan areas are more sluggish. This geographic mismatch is likely caused by rapidly shifting migration patterns as well as emerging demographic forces, especially the "millennial effect" of migration by the mostly millennial 25-44-year-old cohort.

Author:

Zhong Yi Tong