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Market minute: U.S. housing supply is not meeting demand

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U.S. housing completions have declined from a cyclical high of 1.763 million annually last August to a recent low of 1.544 million.

That decline is likely to continue and fall below 1.45 million given that homes under construction ended last year at 1.431 million.

Although housing starts are a more useful metric for estimating gross domestic product, housing completions provide greater insight into the current frustrations around the domestic housing market amid plentiful demand and an inadequate supply of both new and used homes.

Housing completions

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While housing completions look stout compared to the past quarter century average of 1.281 million, demographically driven demand requires closer to 2 million completions at an annualized pace. The overall housing market remains more than 3 million units short.

One reason for the inadequate supply is that many homeowners are sitting on low-rate mortgages locked in during the pandemic and before. Close to 73% of all mortgages have rates at or below 5%.

Now, with mortgage rates having risen, the housing market is simply not functioning in a way that will meet demand anytime soon.

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About Joseph Brusuelas

@JoeBrusuelas

Joe Brusuelas, “chief economist to the middle market,” is the preeminent voice championing issues and policies facing midsize companies in the United States and around the world. An award-winning economist, Brusuelas has more than 20 years’ experience analyzing U.S. monetary policy, labor markets, fiscal policy, international finance, economic indicators and the condition of the U.S. consumer.

A member of the Wall Street Journal’s forecasting panel and the UCLA Anderson School of Management's Board of Directors, Brusuelas regularly briefs members of Congress and other senior officials regarding the impacts of federal policy on the middle market and the factors by which middle market executives make business decisions. He also frequently offers his insights on the U.S., Canadian and global economies in the financial media. In 2020, he was named one of the 100 most influential economists by Richtopia. In December 2023, Brusuelas and the economics team were recognized on Bloomberg's list of Best Bond Forecasters after correctly predicting where the benchmark Treasury would end the year.

Before joining RSM in 2014, Brusuelas spent four years as a senior economist at Bloomberg L.P. and the Bloomberg Briefs newsletter group, where he co-founded the award-winning Bloomberg Economic Brief. Earlier in his career, he was a director at Moody's Analytics covering the U.S. and global economies for the Dismal Scientist website. He also served as chief economist at Merk Investments L.L.C. and chief U.S. economist at IDEAglobal.

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