The U.S. housing market is undersupplied by about 3.3 million units, and the shortage is advancing by about 300,000 units annually, according to Freddie Mac. Enlarging on its 2018 research titled The Major Challenge of Inadequate U.S. Housing Supply, Freddie Mac’s latest Insight, The Housing Supply Shortage: State of the States, probes deeper into the state-by-state housing shortage and migration from one state to those nearby.
“The United States faces a significant shortage of housing relative to what our population needs,” Len Kiefer, Freddie Mac deputy chief economist, told Multi-Housing News. “It is not only expensive coastal states that face a shortage, but shortages have spread throughout the country. Over half of all states face a housing shortage, and that extends to more affordable states like Minnesota and Texas.”
Among the Insight’s revelations is that, by Freddie Mac’s count, 29 states have a housing supply deficit and 21 an oversupply. Excluding the District of Columbia, the largest housing supply deficits are found, in order, in Oregon, California, Minnesota, Florida, Colorado and Texas. Domestic migration from surplus housing states like North Dakota, West Virginia and Alabama to housing deficit states exacerbates an already serious problem.
Zoning regulations have proven to be the most binding location-specific reason for shortages in housing supply; states such as Washington, California and others have launched policy action to address the issue. Housing undersupply is expected to worsen this decade as Millennial and Gen Z populations form households.
One of the most important implications for multifamily owners, developers, managers and investors is that housing shortages in states like California are spilling over into other states, Kiefer said. “As homeowners and renters leave expensive states and move to nearby states, they put pressure on those housing markets as well,” he noted.
“For example, in recent months Idaho has had the fastest house price appreciation among all 50 states; a big factor driving that is people moving to markets like Boise.”
The take away for multifamily industry professionals? Given a housing shortage of more than three million units, there’s ongoing growth potential in the U.S. housing market.
“As the Millennial generation ages, we will likely see significant increases in both homeowner and renter households,” Kiefer said. “That growth provides opportunity to those who can figure out ways to overcome the challenges of inadequate housing supply.”