Line chart, housing demand vs. supply
Y-axis: Thousands; X-axis: 2007-2022.
Existing home sales SAAR generally exceed housing inventory. In early 2007 sales were near 5.7 million with inventory near 3.6 million. By 2008 inventory briefly exceeded sales, but late in the decade sales again recovered vs. inventory. By late 2010, sales and inventory were briefly about equal. Since 2010 U.S. existing home sales have significantly exceeded housing inventory, with recent home sales between roughly 5 and 5.5 million, and inventory fluctuating roughly between 1.7 and 2.2 million. At the end of February 2020, existing home sales reached over 5.7 million before dropping to 3.9 million by the end of May, when housing inventory stood at just over 1.8 million. By late August, sales were at 6 million while inventory was near 1.8 million, and by late November 2020 sales were near 6.7 million with inventory near 1.6 million. As of late August 2022, sales were near 4.8 million and inventory was near 1.7 million.
Line chart, showing the ratio of housing starts per 100,000 households, and unsold inventory of resold homes to sales.
Y-axis: Ratio; x-axis, 2007-2022.
From 2007 starts per 100,000 households declined significantly, from a ratio of nearly 15 starts per 100,000 households to about 5 starts in 2009. Since then the ratio has increased to just over 14 starts by July 2022.
Meanwhile, the unsold inventory of resold homes to sales, which peaked at 11.9 in July 2010, has steadily declined to 3.2 in August 2022.
Line chart, housing units authorized vs. housing market index
Left y-axis: NAHB/Wells Fargo Housing Market Index level; right y-axis: Housing units authorized by building permits (in thousands), x-axis: 2007-2022.
Authorized housing units fell from 1.6 million in 2007 to less than 600,000 by 2009. At the same time, the housing index fell from near 40 to 8 by 2009. Since 2012, however, improvement in the housing index has exceeded housing units authorized by building permits. In recent years, both the index and authorized units have leveled somewhat. By February 2020 the index stood at 74, then fell to 30 by the end of April, recovering to 83 by Q3 end. Meanwhile, authorized housing units, at over 1.3 million in March, fell to just over 1 million by the end of April, recovering to about 1.5 million by the end of August. By the end of Q3 2022, the housing index stood at 46, while authorized housing units at the end of August 2022 were about 1.5 million.
Line chart measures whether a typical family could qualify for a mortgage on a typical home.
Y-axis: Index Level; x-axis: 2007-2022.
NAR Housing Affordability Fixed Mortgage Index—U.S. increased from near 120 in 2007 to a recent peak of roughly 208 in 2013. It declined amid some volatility to about 138 in 2018, and rose to just over 170 in July of 2020, ending November near 168. As of July 2022, the index was at 102.2.
Sources: Bloomberg, U.S. Census Bureau, and Wells Fargo Investment Institute. Monthly data from January 1, 2007 to August 31, 2022. NAHB/Wells Fargo Housing Market Index: monthly data from January 1, 2007 to September 30, 2022. NAR Housing Affordability Index: monthly data from January 1, 2007 to July 31, 2022. 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
- Housing activity is winding down in response to recent increases in mortgage rates and a resulting decline in affordability to a 33-year low.
- A loss of housing momentum is undercutting an important tailwind to the economic recovery, directly and indirectly, through its large ripple effect on other parts of the economy.