You don’t have to be an economist to understand supply and demand’s contribution to the current home shortage. When there are more buyers than there are sellers, prices rise. This is true for any market, including the housing market. When there are too few home buyers, homeowners have to price their homes low enough to attract the buyers that are active. When there are too many buyers, the opposite is true.
Home Shortage
This is why prices have been increasing now for several years. Many housing markets across the country are suffering from a lack of homes for sale. But why? Well, according to Freddie Mac, the issue has its roots in the financial crisis and housing crash. After the crash, many small home builders went out of business and have not returned. That’s led to fewer new homes being built and especially in the affordable price ranges that are most in demand. Freddie Mac estimates that the home shortage is now 3.3 homes short of where it should be.
New Home Building Increasing
Fortunately, recent trends point to an uptick in new residential construction and, as the rate of new home building increases, it should help bring balance to the market and keep prices in check. See the detailed article from From Housing Wire by clicking here. (source)
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