Bank of America’s housing analysts are highlighting a significant shift in the dynamics of the U.S. housing market over the past decade. Contrary to the pre-financial crisis era characterized by an oversupply of homes, the recent trend reveals a noteworthy underbuilding phenomenon. According to their analysis, this underbuilding has not only absorbed the excess of 2 to 3 million homes from the earlier overbuilding phase but has also resulted in a striking deficit of 4 million homes in the U.S.
In a paper published this fall, Bank of America analysts assert that the most direct remedy to address the housing shortage is a substantial increase in home construction. They emphasize the critical need for building more homes as a fundamental solution to the housing deficit, underlining the urgency of such measures.
The paper delves into a comprehensive analysis, evaluating building permits issued relative to the local population. Unsurprisingly, the findings indicate that major Sun Belt markets are leading in adding housing units at the fastest rate, while regions with slower population growth, particularly in the Northeast and Midwest, are lagging behind in new construction.
Bank of America’s examination extends to the correlation between home construction and population growth, identifying cities likely to face prolonged housing shortages. Utilizing near real-time migration data and total housing stock from Bank of America’s internal data, the analysis identifies San Antonio, Dallas, and Orlando as cities with the most constrained housing supply. These areas are experiencing robust labor markets, continually attracting people and thereby exacerbating the housing shortage. Conversely, St. Louis, Detroit, and Miami are noted to have higher housing stock relative to their population, indicating a more balanced housing market in these locales.