By Natalie DeCoste
High home prices may be around longer than expected as a new report from the National Association of Realtors brings to light significant problems in the housing market.
The new report from the National Association of Realtors (NAR) was released on Wednesday, titled “Housing is Critical Infrastructure: Social and Economic Benefits of Building More Housing.” The NAR hopes to persuade lawmakers to include housing investments in any infrastructure package.
The report notes that in the past 20 years, the construction of new housing fell 5.5 million units short of long-term historical levels.
“Following decades of underbuilding and underinvestment, the state of America’s housing stock, which is among the most critical pieces of our national infrastructure, is dire, with a chronic shortage of affordable and available homes to house the nation’s population. The housing stock around the nation has been widely neglected, with a severe lack of new construction and prolonged underinvestment leading to an acute shortage of available housing,” read the report.
The years-worth of underbuilding has led to a monumental gap between consumer demand and nationwide supply in the housing market. In turn, this gap has pushed home sales up to record numbers and housing prices alongside it.
According to NAR, the median existing-home price rose 19% from a year earlier to $341,600 in April, a record high. The supply shortage of homes has been exacerbated by the pandemic when builders slowed construction and land purchases. On top of the construction issues, low mortgage-interest rates and an increase in remote work led to a surge in demand for single-family housing.
The report notes that to rectify the underbuilding issue, the U.S. would need to accelerate building to a pace well above the current trend. The construction industry would need to produce more than 2 million housing units per year. This would represent an increase of more than 700,000 units per year, which is approximately 60% relative to the pace of housing production in 2020.
The group called for government action to help solve the housing crisis. Among the solutions listed in the report were expanding resources and existing programs, incentivizing shifts in local zoning and regulatory environments, and promoting conversions of older or underutilized commercial space.
Most importantly, the group called for a coordinated approach to planning, funding, and developing all forms of infrastructure. The NAR encouraged strengthening and expanding the existing Affirmatively Furthering Fair Housing (AFFH) framework, among other government programs. Some of the solutions presented by the group are in President Joe Biden’s infrastructure proposal.
“Large-scale investment in infrastructure for the 21st century provides a once-in-a-generation opportunity to avoid the mistakes of the past and instead build infrastructure and housing together in a way that plans for inclusive and sustainable growth that binds communities together instead of dividing them along racial lines,” read the report.
The group estimates that adopting its proposed expansion of home construction would create 2.8 million new jobs and generate more than $400 billion in economic activity.
Other industry experts disagree about the scope of the problem presented by the NAR. Industry consultant John Burns, chief executive of John Burns Real Estate Consulting LLC, said by his estimate, the U.S. has a deficit of fewer than a million homes. While the scope of the problem is up for dispute, it is undeniable that consumers are feeling the impact of the shortage.
