From a construction standpoint, the US is short about 1.5 million homes. We need at least another 760,000 single-family homes, and another 760,000 rental units to be built according to Freddie Mac. That would mean 1.5 million homes would need to be constructed TODAY to create a balanced market.
The worst part is that that figure is “certainly a dramatic underestimate” because it doesn’t account for buyers sidelined until mortgage rates tick down, or homes not on the market because of the lock-in effect I wrote about previously. If mortgage rates dropped a little bit, that number would increase as more buyers enter the market.
Based on the rate of single-family home sales in Essex County over the past six months, we need another 1,071 homes on the market TODAY to create a ‘balanced’ market. We’d also need another 317 multi-family properties today (all per GSMLS).
And because those numbers would only create a balanced market (favoring neither the buyer nor seller), it’s likely an underestimation. In that scenario, prices might stabilize. This could bring more buyers into the market and change the rate of sales.
I’ve said it a million times, but real estate is just supply and demand. There are nuances, but at its core, it’s just that. People are still buying despite today’s market because they recognize it’s only going to cost them more later.
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