Story at a glance
- A recent data set tracking single-family housing availability through basic supply and demand shows the U.S. cities and metropolitan areas where this aspect of the housing shortage is the worst.
- The data compares supply and demand by the number of permits issued for every new job. One single family permit is issued for every two new jobs in a balanced market.
- The New York City metro area was hit hardest by the single-family housing shortage last year, according to data from the National Association of Realtors.
The U.S. is short millions of homes after decades of underdevelopment and a more than two-year housing market boom that was driven by low mortgage rates and remote work options.
One piece of the broader shortage puzzle is the underproduction of single-family homes often stemming from land restriction policies.
But a recent data set tracking single-family housing availability through basic supply and demand shows the U.S. cities and metropolitan areas where this aspect of the housing shortage is the worst.
The New York City metro area was hit hardest by the single-family housing shortage last year, according to data from the National Association of Realtors (NAR).
In the New York-Newark-Jersey City metro area, one single-family permit was issued for nearly every 38 job openings over a 12-month period ending in July. During that time period, there were more than 497,000 new jobs compared to 13,229 single-family permits issued.
NAR’s housing shortage tracker compares supply and demand by the number of permits issued for every new job. One single family permit is issued for every two new jobs in a balanced market.
But what sets NAR’s tracker apart from other data measuring the shortage?
“NAR’s housing shortage tracker is unique as job growth — instead of household formation — is used as a proxy to measure housing demand,” Nadia Evangelou, NAR’s senior economist and director of real estate research, told The Hill.
“Keep in mind that as more people enter back into the workplace, demand for housing is expected to remain strong as they set their sights on homeownership,” Evangelou said.
After the New York City metropolitan area, the town hit hardest by the single-family housing shortage is Rockford, Ill., near suburban Chicago. There were 236 single-family permits issued over 12 months ending in July compared with 7,600 new jobs — equaling 32.2 jobs for every housing permit issued.
The Illinois capitol of Springfield held the third spot on the shortage tracker. Here there were 4,200 jobs over the data period while 133 single-family permits were issued.
The San Francisco and Boston metro areas finish out the top five in NAR’s housing shortage tracker. In the San Francisco metro region, there were 30 new jobs for every single-family permit issued. And in Boston, there were more than 28 new jobs per permit.
Cities experiencing major shortages of single-family homes feature similar characteristics, Evangelou explained, saying they are “severely constrained by land-use restrictions” that increase the cost of homebuilding.
Still, the housing shortage, which NAR estimates at 5 million homes, is not a recent phenomenon.
“The housing shortfall was created over decades. After the mid-2000s boom, we continued to underbuild compared to the historical average,” Evangelou continued. “In the meantime, lower mortgage rates during the pandemic aggravated the shortage. Even though demand has slowed down, there are still not enough homes.”
Sky-high mortgage rates stemming from the Federal Reserve’s persistent interest rate hikes continue to put pressure on Americans looking to secure affordable housing. Although home prices and rents are falling in markets across the U.S., they remain higher than last year.
The 30-year fixed mortgage rate climbed to 6.94 percent in the second week of October, up from 6.81 percent a week earlier, marking the highest 30-year rate since 2002.
High mortgage rates are also impacting the supply side as both inventory and home builder sentiment continue to fall.
Data from the National Association of Home Builders (NAHB) shows that builder sentiment fell for the 10th straight month in September while prospective homebuyer traffic dropped to its lowest point since 2012 — the exception being the onset of the coronavirus pandemic in 2020.
Meanwhile, new housing construction fell in September as sky-high mortgage rates weakened demand.
Housing starts decreased 8.1 percent to a seasonally adjusted annual rate of 1.4 million units last month, while single-family starts declined by 4.7 percent, according to Commerce Department data released on Wednesday.
Despite slowly rising inventory after a two-year housing boom, economists say it remains at historic lows and they expect further declines.
NAHB Chief Economist Robert Dietz said in a statement earlier this week that housing starts, which reached their lowest point since 2011, will continue to fall as the market retracts.
“And given expectations for ongoing elevated interest rates due to actions by the Federal Reserve, 2023 is forecasted to see additional single-family building declines as the housing contraction continues,” Dietz said.
“While some analysts have suggested that the housing market is now more ‘balanced,’ the truth is that the homeownership rate will decline in the quarters ahead as higher interest rates and ongoing elevated construction costs continue to price out a large number of prospective buyers,” he concluded.
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