The Looming Crisis for Housing
authors Eliot Sefrin | September 2, 2021
The kitchen and bath industry, fueled by a rebound from the impact of COVID-19, may be witnessing robust demand, heightened activity and bullish sales projections. But even in the midst of the current growth spurt, a serious threat to the long-term vibrancy of the market may well be looming.
The potential pitfall isn’t merely the prevailing issues of soaring materials prices, supply chain disruptions, labor shortages or even a spike in coronavirus cases – although those headwinds are surely daunting enough.
Even more troubling, in the view of market analysts, is the fact that there is seemingly not enough of an existing base of homes in America to accommodate the projected long-term demand from home buyers and residential remodeling consumers, including those shopping for kitchens and baths.
Indeed, new research commissioned by the National Association of Realtors has revealed that more than two decades of underinvestment and underbuilding in America has created an historic shortage of housing inventory – an “underbuilding gap” of 5.5 to 6.8 million housing units – that is far more dire than previously thought. This shortage affects every region of the U.S. and has created what the NAR is terming “a once-in-a-generation crisis.”
The reasons for the crisis are self-evident…or ought to be by now.
According to housing analysts, as the U.S. economy continues to rebound from the impact of COVID-19, households that managed to weather the public-health predicament are snapping up the limited supply of homes for sale, dramatically escalating prices and further excluding less-affluent buyers from homeownership. At the same time, millions of homeowners and renters who lost income during the pandemic have fallen behind on mortgage payments and, in many cases, are on the verge of eviction or foreclosure.
As if that’s not enough, a parallel report, released this summer by the Harvard Joint Center for Housing Studies, found that the current unprecedented combination of robust demand, limited supply and record-low interest rates have lifted home prices to their fastest growth pace in more than a decade, raising concerns that a home price bubble is emerging. And although the U.S. homeownership rate remains on an upward trajectory, disparities between households of color and white households remain substantial and growing, further constraining potential market growth.
These findings should spark more than a modest degree of concern.
An adequate stock of new and existing homes is no doubt critical to the vibrancy of the kitchen and bath market, since it provides opportunities for homeowner investment that fuels the revenue stream of design firms, remodelers, manufacturers, distributors and others in the product supply chain. Without enough homes to work on or to build, profit opportunities, quite simply, become constricted and market potential becomes stunted.
Major trade associations, including the NAR and the National Association of Home Builders, have called upon Congressional lawmakers to enact government policies aimed at helping builders expand the housing supply and improve affordability. Among the supply-side constraints in need of attention are the aforementioned costs of building materials and vulnerabilities in the product supply chain. Other issues to be addressed include current lending restrictions, zoning and land-use policies that limit the number of buildable lots, and regulatory burdens that have added substantial costs to the construction of homes. Policymakers also need to prevent people at financial risk from falling hopelessly behind.
The housing shortage has taken center stage in debates over future government housing policy, particularly now that housing has become a key component of Congress’s proposed national infrastructure plan. Like roads, bridges, transportation, communication and power grids, housing should be seen as an essential infrastructure component that enables industries like the kitchen and bath trade to achieve their full potential.
While policymakers have already taken steps to assist homeowners through the worst of the pandemic, reaching the number of U.S. homes required to meet anticipated demand will require additional government support – indeed, nothing short of a major, long-term national commitment.
A potential housing crisis is looming. The time to try and stave it off is now. ▪