Freddie Mac Says the Market Needs 4 Million More Homes

In order to close the gap between housing demand and inventory, the market needs 4 million more homes for sale, according to a new report from Freddie Mac. The housing inventory issue has increased 52% during the past two years while the construction of entry-level homes has declined more than 84% during the past four decades. First-time buyers, who amount to about 2.4 million, are feeling the pressure with less cash than their homeowner counterparts and fewer entry-level options. In the 1970s, 418,000 entry-level homes were constructed each year while only 65,000 were built in 2020, says Business Insider.

Lingering effects from the 2008 financial crisis, when many construction companies went out of business amid a downturn in consumer spending, contributed to the shortage as well. While builders have started to increase production output in the past year — up 18% from 2019 — lumber and labor shortages have made home construction even more expensive.

In the past year alone, the median cost of a home in the US shot up 15% from $300,000 in 2019 to $340,000 by the end of 2020, according to data from the National Association of Realtors. That measure does not even begin to account for hot housing markets like Austin, Texas, where the average home went for over $800,000 in March.

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