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In just about every corner of America, it’s a familiar refrain. Housing is too expensive – if it’s even available.
All real estate is local, of course, and there are very specific reasons why a property in any particular community has the price tag it does. Still, there are a few key reasons why America has what many people consider a national housing crisis.
The single most important thing to know: Nationwide, demand has increased and there’s a shortfall estimated to be in the millions of homes.
Many housing experts believe that the lack of supply is the biggest reason for the housing shortage, which in turn drives prices higher. But demand is also a factor, and one of the most important reasons demand is higher is the millennial generation.
There’s a lot more consensus on the reasons for the shortage. The biggest one: After the financial crisis of 2008, homebuilding activity tumbled. That’s understandable. Construction companies overbuilt during the housing bubble, and were left with a glut of homes when credit dried up and unemployment soared.
But construction has never caught up.
A report commissioned by the National Association of REALTORS® in 2021 examined that issue as well. Between 1968 and 2000, it showed, an average of 1.5 million homes were built every year. Even accounting for the excesses of the early 2000's, that average fell to 1.225 million homes per year from 2001 to 2020. That adds up to a shortfall of 5.5 million units over 20 years.
There were 72.1 million millennials – people aged 23 to 38, the prime years for buying a home. In 2023, millennials bought 38% of all homes, according to a NAR report – comprising the biggest category of buyers by age.