Why housing inventory is so low right now

Given the current housing inventory crisis, it might surprise people to realize this: we built too many homes during the housing bubble years. Wait, what? But we have a housing shortage, right? Yes, but this is where my work is much different from other housing economists and why we need to think of inventory in a new, modern 21st-century mindset.

The big theme of my housing work since 2010 has been that the housing market would have its weakest recovery from 2008 to 2019 because we simply built too many homes versus the real demand curve, and monthly supply proves that. If you look at the monthly supply for new homes from 1996 to 2005, it was always lower than what we saw from 2008 to 2019. New home sales were working from the lowest levels ever, but sales kept on disappointing analysts and economists.



We had a few years where sales missed expectations in 2013, 2014, and 2015. Then in 2018, when mortgage rates got to 5%, we had a supply shock for the builders, which in essence stalled out construction for 30 months.