PodcastNational Housing Market Outlook

How Many Homes Are Enough?

Dean Wehrli

Dean Wehrli

March 1, 2023

2 million? 4 million? 5 million? Though the exact number of homes needed is up for debate, no one denies there is a housing crunch in the US. John Burns Real Estate Consulting’s chief demographer, Chris Porter, recently wrote a white paper called America’s Needed Housing Construction that tackles this complicated question. How many homes do we really need? Can they be built? What are the disconnects between what can and should be built? We outline some answers to these questions below:

Featured guest

Chris Porter, Senior Vice President and Chief Demographer, John Burns Research and Consulting

Even if we don’t need as many homes as some think, it’s still a big number.

  • The key to understanding the level of housing need is household formations, and the key to getting a sense of how many homes will be formed is to build from the ground up: looking at the local level to build to a national number.
  • Though some groups have cited that the nation needs four million or more homes to house its people properly, Chris estimates that figure is closer to 1.7 million.
  • This stems from understanding that there are market and societal constraints on household formation. Housing affordability remains a significant impediment for some people to form their own household. Many others are choosing to delay this process for cultural or lifestyle reasons.

Housing’s demand and supply balance ebbs and flows over time.

  • Chris argues that the market was oversupplied for much of the 2000s, but we have gradually absorbed that excess supply and are now undersupplied.
  • To be clear: there is still a tremendous need for housing at price points affordable to more Americans at lower income levels, but challenges persist to profitably build those homes in many of the most constrained markets across the country.

The key driver is household formation.

  • There will be no single product to save the day—it will take single-family, multifamily, and manufactured housing to fill the housing gap.
  • While there are other factors like second-home purchases, the key driver of housing need is household formation.
  • Chris crunches the numbers over the decade from 2020 to 2030, focusing on long-term vacancy rates across dozens of metro areas across the country. He then couples this with an analysis of household formation patterns to show another layer of housing undersupply.
  • Chris projects household formation levels to grow and be a “tailwind for housing’s future” through the rest of the decade. With mortgage rates where they are, housing needs all the tailwinds it can get.

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About The Author

Dean Wehrli
Dean Wehrli
Dean helps housing sector clients figure out not just what might work and what might not, but why.

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