Higher Rates and Short Supply:

As noted, one of the largest hurdles to homeownership is a lack of inventory. According to a February 2022 report by Realtor.com, there’s an expanding gap between household formation and home construction, which has resulted in a nationwide shortage of 5.8 million housing units.(11)

The origins of this shortage date back to the 2008 housing crisis, during which crashing home values led contractors to stop building new properties—a trend that has not been fully reversed.(12)

That decline in home construction also resulted in a decrease in the number of home building professionals, a trend that was exacerbated by job losses during the COVID-19 pandemic. Now, many builders are limited by their ability to find qualified labor.

Another major challenge is a staggering increase in the cost of materials. Pandemic-related supply chain shortages have been a significant driver, with home building material costs rising on average 20% on a year-over-year basis. The price of framing lumber alone has tripled since August 2021.(13)

These trends add tens of thousands of dollars to the cost of a typical home. Factors like a lack of buildable land in many areas, restrictive zoning, and a shortage of developers are also contributing to the issue.(14)

Most homebuying experts agree that the lack of inventory is the primary factor driving rising housing prices and unprecedented competition for homes. With available housing units near four-decade lows, the end of the current housing boom is not yet in sight.(15)