As the pandemic unfolded, the allure of city living began to fade for many. Families, in particular, found themselves seeking more spacious homes with dedicated office spaces and room to breathe. This shift in priorities led to an exodus from urban centers to the suburbs, where larger homes and bigger yards awaited.
According to Jerry Howard, CEO of the National Association of Home Builders, “Everybody expected housing to really sort of dry up with the rest of the economy. And in fact, the opposite has happened. People who have been sort of scared out of the cities by the pandemic.”
However, this mass migration to suburban living has created an unexpected challenge—a record low supply of homes for sale. With homeowners reluctant to part with their suburban sanctuaries, buyers are now engaging in intense bidding wars to secure their dream homes.
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The scarcity of available homes is not a recent issue but rather the culmination of a long-standing problem. The U.S. has underbuilt its housing needs by a staggering 5.5 million units over the past two decades, as reported by the National Association of Realtors. This shortage stands in stark contrast to the overbuilding that contributed to the housing bubble of 2008.
Several factors have contributed to this housing shortage, including rising costs for land, labor, and building materials, particularly lumber. Despite these challenges, experts view the current state of the market as more of a housing boom than a bubble.
Diana Olick, CNBC real estate correspondent, notes, “We say bubble because we can’t believe how much prices have gone up. A bubble tends to be something that’s inflated that could burst at any minute and change, and that’s not really the case here.”
Simultaneously, the suburbs of America are experiencing a resurgence. In the 20th century, real estate developers erected vast swaths of single-family homes in suburban areas, guided by mortgage underwriting standards established by the Federal Housing Administration in the 1930s. These guidelines, while creating suburban communities, also contributed to housing market conditions that systematically excluded many minority populations.
Updating these antiquated building codes offers a path to greater equity while addressing some of the issues associated with American suburbia. In 2021, single-family housing starts reached 1.123 million, the highest figure since 2006, according to the National Association of Home Builders. Nevertheless, prospective homebuyers still face limited options.
Experts argue that past policy decisions, particularly restrictive zoning codes rooted in 1930s-era guidelines, are a primary factor limiting housing supply. These codes, characterized by features like “no sidewalks and curvy dead-end streets,” as noted by Ben Ross, author of “Dead End: Suburban Sprawl and the Rebirth of American Urbanism,” continue to shape suburban landscapes.
The rental market is also undergoing significant changes, with rents expected to rise substantially in the coming years, potentially placing further strain on Americans who already allocate 30% or more of their income to rent. While a slowdown in house building over the past decade is showing signs of reversal, new construction primarily caters to high-end and luxury apartment units, pushing people farther from their workplaces and impacting the broader economy.
The challenges in the housing market extend beyond the suburbs, as rents for single-family homes across the country have surged by over 9% on average from the previous year, according to CoreLogic.
In conclusion, the Covid-19 pandemic has triggered a seismic shift in the U.S. housing market, reshaping where and how Americans live. The exodus to the suburbs, coupled with long-standing housing shortages and evolving rental dynamics, paints a complex picture of the American housing landscape. The solutions to these challenges will require innovative policies and a commitment to equitable housing for all.