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US In Need Of Massive New Home Construction

BY Sajana

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The American dream of owning a home is fading for millions of Americans due to lingering affordability issues and the country needs a massive influx of new home construction to make the homeownership attainable again, according to Ned Davis Research.

The 30-year fixed mortgage rate has been hovering around 7% the past year, surging to 8% briefly at the end of 2024 before dipping again. The research firm said a shortage of 2.2 million homes is compounding the US housing market's affordability issues. The lack of supply was driven by a long period of underbuilding in the aftermath of the 2008 US housing crash.

But even with a renewed urgency to increase the supply of homes, there are a lot of challenges. Rising development prices across the board suggest to NDR that housing supply will remain constrained for years to come.

Higher insurance costs, higher taxes, higher costs of capital, elevated land prices, and increased environmental regulations have mixed together to create a powerful cocktail that's limiting the country's ability to build enough homes.

Another input of the housing market that makes it harder to build affordable homes is increased labour costs, and the recent surge in immigration isn't helping like it may have in the past.

All in all, the outlook for the US housing market is not looking great if you're a prospective buyer, as higher home prices appear to be the new norm with no correction in sight — and if the Federal Reserve cuts interest rates, leading to falling mortgage rates, home prices could surge even more.

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Tags : Ned Davis Research Higher insurance costs higher taxes higher costs of capital affordability issues