Houston, Texas – In a profound revelation regarding the burgeoning housing crisis in the United States, recent research conducted by the Bank of America has delineated a troubling landscape for prospective homebuyers, who now find themselves grappling with an acute and chronic shortage of available residential properties. The scarcity is particularly pronounced in specific geographic locales, intensifying concerns over affordability and accessibility of homes.
Dallas, Houston, San Antonio face serious housing shortages, with Orlando, Florida completing the list
Four cities emerge as the nexus of this housing shortage, of which three are situated in the state of Texas — namely San Antonio, Dallas, and Houston — with Orlando, Florida completing the list. These cities, described in the report as constituting a “hot quadrant,” are characterized by rapid inward population growth in conjunction with already strained housing stocks. Specifically, the study asserts, “San Antonio, Dallas, Orlando and Houston all fall under this categorization.”
This situation is attributable, in significant measure, to the conjunction of multiple economic and demographic factors. The cities are in the midst of a surge in population growth, buoyed by a thriving labor market, colloquially referred to as “booming,” and concomitant low housing inventory. As of June 2023, the report noted that Dallas and Orlando both recorded payroll growth substantially exceeding the national average, thereby magnetizing new residents in search of employment opportunities.
Dallas, Houston, San Antonio and Florida are facing housing shortages due to newcomers
However, this influx of newcomers serves as a double-edged sword, contributing to a conundrum wherein housing stock relative to population has plummeted beneath the national average. In a comparison with the national figure of housing units per capita, which stood at approximately 0.43% as of 2022, Dallas and San Antonio were marked by an even starker contrast at just 0.39% and 0.40%, respectively.
The repercussions of this shortage have manifested in these cities as an escalation in home price growth, dwarfing levels witnessed over the past two years. Illustratively, home prices in Orlando registered an increase of 58% compared to the same month in 2019, while Dallas experienced an augmentation of around 49%.
Nonetheless, there are emergent indications that the cities are actively engaged in strategies to ameliorate the scarcity of available homes. During the initial five months of 2023, all four cities observed higher-than-average permits issued per capita, a precursor to potential alleviation. Furthermore, projections indicate that new multifamily completions are poised to reach an unprecedented high in 2024, signaling a potential easing of the pressure as COVID-19-related disruptions recede.
“So, while the good news is that cities with lower housing supply are already seeing higher construction trends, the question is whether supply will continue to keep up if the inward migration trends are sustained in these growing parts of the country,” the study said. “If not, there will continue to be a strong housing need.”
There is a surplus in housing supply in some cities including St. Louis and Detroit
In a notable divergence from the prevailing trend of housing scarcity in certain American cities, recent data also reveals the existence of urban areas at the other extremity of the spectrum, where the market is typified by a surplus in housing supply. This phenomenon may be attributed to divergent underlying factors, including either a declining population or a glut resulting from overconstruction.
St. Louis and Detroit appear to epitomize the former scenario, characterized by population diminution, whereas Miami may serve as a representative instance of the latter, where excessive construction has led to a glut. This polarization in housing dynamics suggests that the realities faced by cities across the nation are far from uniform.
In the specific case of these three cities, the oversupply could portend an impending depreciation in property values, necessitating homeowners to prepare for potential financial impacts.
“So what does this mean for the local housing market?” the note said. “It could mean that house prices might cool faster over the long term when home selling traffic picks up again.”
This particular analysis was undertaken by Bank of America by examining real-time migration flows juxtaposed with housing stock, utilizing its proprietary internal data. The study provides essential insights at a time when both potential homebuyers and sellers are wrestling with a nationwide housing crunch.
Indeed, the most recent approximations from Freddie Mac postulate that the United States is grappling with a daunting shortfall of approximately 3.8 million units of housing available for both purchase and rental. This dearth of inventory continues to exert upward pressure on prices, sustaining them at disconcertingly elevated levels.
Complicating this scenario is the concurrent persistence of mortgage rates in the vicinity of the highest levels witnessed in decades, adding a layer of complexity to the already intricate housing landscape. This confluence of factors underscores the nuanced nature of the American housing market, where excess and scarcity coexist, driven by diverse regional dynamics and influenced by macroeconomic variables, thus presenting multifarious challenges and opportunities for stakeholders.
“Current housing market dynamics continue to be fueled by the lack of existing homes available for sale, a trend that did not improve during the spring homebuying season, when more homes are typically put on the market,” Fannie Mae economists wrote in the analysis.
“This has supported a return to home price growth in recent months and continued to boost new home construction.”