Insider Monkey

20 Cities With the Biggest Housing Shortage

Ramish Cheema
8 min read

In this piece, we will take a look at the 20 cities with the biggest housing shortage. For more cities, head on over to 5 Cities With the Biggest Housing Shortage.

The housing industry is one of the most closely watched sectors, particularly these days. It is the few sectors that are often tied to either economic turmoil or economic prosperity in America. In fact, the imbalance in the housing sector led to one of the most devastating economic crises in recent American history, namely the Great Recession of 2008. It was an imbalance in the market, that led to an excessive amount of mortgages that buyers could not keep up with during a high rate environment coupled with inconsiderate financial instruments created by banks and the irresponsible behavior of rating agencies that led to defaulted mortgages spiraling into banks going out of business, the stock market crashing, and the Federal Reserve being forced to jump in to absorb bad debt and expanding its balance sheet to an extent that it is still struggling to control today.

The effects of the housing market crash are in fact being felt in the market even today in terms of shortage. In fact, estimates from Harvard University show that even ten years after the housing crisis of 2008, buyers were warier of getting loans to finance their purchases, mortgage providers weren't as eager to have a portfolio of countless products, and real estate agents knew better than to push the most expensive home on a prospective buyer. Americans, it seems, had learned some hard lessons that they could have done with at the turn of the 21st century.

Yet, these lessons would soon be faced with a new world reality. While the 2019 coronavirus pandemic did not see many homeowners default on their mortgage payments due to low interest rates and generous stimulus spending by the U.S. government, the aftermath of the virus's impact would leave everyone unprepared. Data from the Federal Reserve Bank of Dallas shows that after the coronavirus recession, housing prices jumped by a whopping 19.3% to set a new record. This was due to most buyers being forward looking and anticipating an uptick in the prices - leading them to jump head first into the market to preempt any price jump. This translated into a self fulfilling prophecy, leading to a price rise that left many stunned.

Another consequence of the pandemic was a tightness in the housing market, and our rudimentary knowledge of supply and demand would indicate that a shortage would naturally lead to higher prices for the units that were available. Why did the market become tight? Well, lockdowns, social distancing, and subdued economic activity led to fewer houses being built - right at the time when people were looking to shift to suburban areas to enjoy the benefits of remote working. Data from the Fed shows that months of housing supply fell to a two decade low in 2021 while prices jumped to an all time high during the same time period. Building on this, data from We Are Apartments takes a current look at the U.S. housing market. It shows that right now, there are 38.9 million apartment residents in America while there are 22 million apartment homes. Additionally, 44% of U.S. apartments have been built before 1980, indicating that nearly half of them are due for maintenance or substitutes. Finally, the data also shows that more than a quarter of a million apartments, or 266,000, are needed each year to meet demand. The industry as a whole contributes $150 billion to the U.S. economy annually and creates 752,000 jobs.

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