Housing market has a supply problem

Sources: Bloomberg, FactSet, and Wells Fargo Investment Institute. Monthly data from January 1, 2007 to August 31, 2021. NAHB/Wells Fargo Housing Market Index: monthly data from January 1, 2007 to September 30, 2021. NAR Housing Affordability Index: monthly data from January 1, 2007 to July 31, 2021. SAAR = seasonally adjusted annual rate. NAHB (National Association of Home Builders)/Wells Fargo Housing Market Index is a widely watched gauge of the outlook for the U.S. housing sector. The NAR (National Association of Realtors®) Housing Affordability Index measures whether or not a typical family could qualify for a mortgage loan on a typical home.

Key Takeaways

  • The housing boom risks becoming a victim of its own success as soaring home prices squeeze affordability and the economy’s reopening encourages a partial rotation from the suburbs back to urban areas.
  • A cooling housing market poses risk to an important tailwind to the economic recovery, directly and indirectly, through its sizable ripple effect on other parts of the economy.