Market minute: U.S. housing supply is not meeting demand

REAL ECONOMY BLOG | February 17, 2025

U.S. housing completions have declined from a cyclical high of 1.763 million annually last August to a recent low of 1.544 million.

That decline is likely to continue and fall below 1.45 million given that homes under construction ended last year at 1.431 million.

Although housing starts are a more useful metric for estimating gross domestic product, housing completions provide greater insight into the current frustrations around the domestic housing market amid plentiful demand and an inadequate supply of both new and used homes.

While housing completions look stout compared to the past quarter century average of 1.281 million, demographically driven demand requires closer to 2 million completions at an annualized pace. The overall housing market remains more than 3 million units short.

One reason for the inadequate supply is that many homeowners are sitting on low-rate mortgages locked in during the pandemic and before. Close to 73% of all mortgages have rates at or below 5%.

Now, with mortgage rates having risen, the housing market is simply not functioning in a way that will meet demand anytime soon.

This article was written by Joseph Brusuelas and originally appeared on 2025-02-17. Reprinted with permission from RSM US LLP.
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