For those who suffered through the housing crash following the financial crisis, it’s hard to imagine that in 2025 there would be a housing shortage.
Yet American residential investment, which stands at 3.3% of gross domestic product, remains tepid at best amid an affordability crisis that will not be solved anytime soon.
Because of an enduring supply problem, the cost of housing is increasing at a 4% yearly rate within the consumer price index, and that rate is half the 8% yearly rate in 2023.
U.S. housing starts for July, which will be released this week, should arrive near 1.3 million on an annualized basis. A figure like that would only reinforce the supply side problem as mortgage rates remain elevated.
In addition, with 1.361 million units under construction and 1.34 million completions in June, it is clear that overall construction is nowhere near adequate to meet demand even with the current 30-year fixed mortgage rate residing at 6.67%.
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