The US continues to face a lack of affordable housing, with a recent article reporting that less than 60% of all new homes sold in the third quarter of 2020 were affordable to families with a median income of $73,000. A lack of existing inventory reduced opportunities for the purchase of existing housing, while supply issues and high lumber prices (both of which have been caused by the COVID-19 pandemic) affected new home production. Together, these factors have sent new home prices soaring, forcing buyers to improvise.
One option has traditionally been to rent – either an apartment, or if possible, a single-family home. However, not only is there a shortage of homes to buy, there is also a shortage of homes to rent, and those that are available are seeing rent increases. People fleeing expensive urban cores – in part to escape more densely populated areas where risk of COVID-19 transmission is higher – have caused the firms that own an increasing number of these rental properties to boost rent, as demand often outstrips supply. This lack of affordable houses to rent (if not purchase) will cause many people to remain in apartments for longer periods of time.
Another option is to put an accessory dwelling unit, or ADU, on or near an existing dwelling. While frequently selected by people seeking nearby residences for aging parents, an ADU – where permitted by local building codes – is an ideal residence type for seniors, adult children who move back home, and for family members between careers or suffering pandemic-related economic reverses. ADUs are less expensive than single-family homes and can be seen as an investment for the future – a homeowner, as they age, may decide to move into the ADU and rent or sell their existing home, for instance.
Renting and ADUs will continue to play an important role in the US housing market until the nation’s inventory of single-family homes increases at a pace fast enough to accommodate the pent-up for housing. Freedonia Group experts will continue to monitor the housing market and study its effects on not only the construction market, but the US economy as a whole.
For more information and discussion of opportunities, see The Freedonia Group’s extensive collection of off-the-shelf research, particularly in the Construction and Building Products. Freedonia also offers an expanding catalog of COVID-19 Economic Impact reports, which highlight how various industries are responding to the current crisis with a comparison to recent recessions. Freedonia Custom Research is also available for questions requiring tailored market intelligence.