If there’s a housing shortage, why are homes sitting?

Question

Hi all,

I was reading about some new comers in the industry, one of them caught some attention. The American Housing Corporation (the Austin prefab row house startup) says the housing crisis is a supply problem. Estimates of the shortage run from about 4 million homes to 10 million.

But the market says otherwise. NAR reports 1.60 million homes for sale, or 4.8 months’ supply, with August and September the slowest sales months of the year. About 1 in 5 listings had a price cut in September.

That looks like an affordability problem, not a supply problem. And AHC’s first Austin row houses will sell for around $750,000, which doesn’t fix affordability.

What are you seeing in your market: a supply shortage or a buyer shortage?

Tell me some thoughts.

Jay Hinrichs · Answer

its a location problem.. not sure the stats i am sure AI could tell you but there are many if not 100s of MSA's with median home prices under 300k which even at todays rates payments would be close to rent. Austin in particular being one of if not the most expensive cities in TX is a prime example.

Chris Seveney · Answer

I agree. It's like snowblower manufacturers all being in areas where it doesn't snow. Overall, yes, there are plenty of homes across the country, but are they in desirable locations? Now people push to increase housing and density in cities and suburbs, but if you have never heard of NIMBYism, look it up. It's just like everything: everybody wants more of something until it has an impact on them. So everyone wants more housing, but they don't want to have it impact their schools, their neighborhood, or their traffic.

Ametria Chaney · Answer

I think both things can be true at once, and that is what makes this market confusing. There can be a shortage of homes at prices buyers can actually afford, while homes priced above what local buyers will pay sit. National figures like the ones you cited are averages that hide a lot of local variation — one price point or neighborhood can be competitive while another is slow. Affordability is the bridge between the two: when prices, rates, and incomes do not line up, you get what looks like a buyer shortage even though plenty of people want to buy. The most useful check is local: in your market, are sellers cutting prices, how long are homes sitting, and are sale prices coming in under list? Those answers tell you more than any national headline about whether you are looking at a supply problem, a pricing problem, or both.

Jimmy Samaha · Answer

I'm in Staten Island and what I see is mostly a buyer shortage, or really a payment shortage. Plenty of people want a house, they just can't make the monthly number work at 6 to 7 percent. A 600k house with 20 percent down is somewhere around 3,500 to 4k a month with taxes and insurance, and that's out of reach for a lot of households.

The shortage is real in certain pockets, like entry level homes in good school districts, those still get multiple offers. The stuff that's sitting is usually overpriced for the condition, or priced like it's 2022. Sellers who price it right the first two weeks still sell.

I agree with Jay that it's local. A new build at 750k in Austin doesn't help anyone who needs a 350k house, so building more of that doesn't fix affordability.

Nathan Shelby · Answer

Not that this is an original opinion, but from what I’m seeing I really think it’s a price problem mixed with a rate problem. I think the down payment gets forgotten about on the grand scheme. An average home buyer with a decent income and young family generally doesn’t have 25% down just sitting around at current prices. And at almost 7% 30yr for older inventory why would you.

Jay Hinrichs · Answer

this has always been the issue especially in higher priced markets. nothing has changed over the decades if you want to live in the best school districts you have to sacrafice and save money full stop.

J Castro · Answer

Great discussion! I believe the housing market is facing both a supply problem and an affordability problem, and the two are closely connected.

In many markets, housing may be available, but the combination of elevated home prices, financing costs, insurance premiums, property taxes, and rising construction expenses has pushed homeownership out of reach for many buyers.

At the same time, not all new housing addresses the needs of the buyers who are being priced out. Building more homes is important, but building homes that people can realistically afford is just as critical.

From an investment perspective, this also creates challenges and opportunities. Developers and investors need to pay close attention to local demand, construction costs, and the price points buyers and renters can actually support. Increasing supply alone won't solve the problem if the economics don't work for the end user.

My take: It's not simply a shortage of homes or a shortage of buyers—it's a shortage of housing that buyers can afford at today's prices and financing costs.

I'd be interested to see how this compares across different markets, particularly where inventory is rising but affordability remains a challenge.

Divin Kanyama · Answer

@Antoine Clerc I think both can be true at the same time. A market can have a long-term housing shortage while also experiencing a short-term shortage of buyers who can afford the homes currently available.

Months of supply and price reductions describe current market liquidity, but they do not necessarily show whether the available homes are in the right locations, price ranges, or housing types. Inventory can rise while entry-level buyers remain constrained by prices, interest rates, insurance, taxes, and incomes.

That is also why adding expensive housing may increase total supply without immediately solving affordability. It can still help over time, but affordability depends on what is built, where it is built, its cost, and whether household purchasing power can support it. I would describe many markets as having a mismatch: too little attainable housing and too few qualified buyers for the inventory that exists.

Jay Hinrichs · Answer

the reality it starts with the raw land price.. in desirable markets IE great schools high paying jobs . U cant have affordable or starter housing when lot prices exceed a certain number.. we can build cheap if that is what the market dictates I built some starter homes in FLA . And have priced build cost ( minus land ) in parts of texas and U can hit those affordable numbers.. However its the price of the dirt that changes the equation. Just take FLA as a prime example. U can buy a lot in Lehigh Acres for what 10 to 20k no problem and be all in 200 to 250k no problem ( problem is finding the contractors) But U cant have scale when you have scattered in fill lots.. Or you take a market like Charleston SC were I have built 40 infil homes over the years.. when I started there 10 years ago I was buying lots for 25 to 40k .. Last lot I bought was 270k last year.. how do you build affordable housing when lots are north of 200k.. Its a land problem as much as anything.

Andre Van Veen · Answer

There are many factors, but what I've noticed in our practice is that user experience matters. Buyers are smarter and looking for life enhancements, not just a house. Homes that offer users an upgraded experience sell quicker than average. A high-rate market, such as the one we're in, adds a layer of hesitancy to potential buyers, so adding unique features and experiences to your projects offers buyers a compelling reason to buy your property. Newer multi-family developments with lower monthly expenses and more amenities are also strong competitors to investors.

If there’s a housing shortage, why are homes sitting?

If there’s a housing shortage, why are homes sitting?

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