What Are the Reasons for 2022’s Housing Shortage?

In case you didn’t hear, the real estate market in 2022 is hurting due to a housing shortage. Few sellers are listing their homes for sale, causing low inventory. Combine that with an influx of buyers, and a housing shortage comes. The effect is ascending home prices due to buyers bidding against each other for the few homes available. So, why is this happening now?

Some Buyers are Investors

Among the many home buyers bidding for homes are investors. These companies and people are snatching homes on the market to turn those homes into rental properties. These homes leave the buying market and into the rental market. More houses to rent means fewer homes to buy.

Additionally, they are paying cash for the home. Cash is a much faster way to buy a home than a mortgage. Instead of meeting the demands of mortgage companies, they will buy a house as-is. That method is tempting for sellers with probate property or in a hurry to relocate, so they take the bait.

It would lessen the burden if investors only paid cash for fixer-uppers or older homes, made them new, and turned those homes into rental properties. Not all investors will go this route, however. Some prefer paying for houses on a city block in bulk regardless of condition. New homes in that lot are out of contention for buying, hence the shortage.

Some Buyers are Millennials

Thirty-eight to forty percent of home buyers are in the millennial crowd. Ranging from the early 20s to early 40s, they passed on homeownership in the past due to the 2008 housing crisis. They opted for roommates with family or friends to save money until it was the right time to move up. Well, now seems to be that time, and the market cannot accommodate the influx.

Generation Z’s older generation is touching 25 years old, and if the housing crisis doesn’t turn around by the time the rest of Gen Z grows up, it will worsen.

New Construction is Severely Lacking

Sellers can’t be the only source of home inventory. New construction fresh from the ground up provides a chunk. Sadly, new construction has taken a nosedive in 2022 as there is a shortage of 2 and 6 million homes. It started in large metropolitan areas and trickled down to mid-sized and small cities. No city is exempt from feeling the pinch.

There are many reasons for this.

Employee Shortage

The few construction workers on the payroll cannot build houses in the entire city, much less the state or the country. Recruiting new people with experience and education to do this is challenging.


The cost of lumber and building supplies increased dramatically. Consequently, companies cut costs by buying cheaper building supplies, affecting home stability and quality during the building process. Inflation attacks fuel costs to transport materials and legal permit costs to build too.

City Zoning Laws

The city sets aside plots of land for building. As home demand increases, the need for more land is crucial. Unfortunately, city laws forbid builders from building on restricted land. That caused discord between the city and the building companies.

Additionally, zoning laws allow for single-family homes to be built. California, Maine, and Oregon are allowing at least two homes to be built per land plot. Most states do not.

The Pandemic

The coronavirus (COVID-19) affected home construction, as many media outlets and government officials forced construction companies and other businesses to shut down. When businesses reopened, a vaccine mandate drove some workers away; inexperienced workers took their place. Overall, the decisions made then are hurting the real estate market now. With home construction picking back up, it won’t be enough to satisfy hungry buyers craving to move up from renting to homeownership.

Some Buyers Work From Home

Another thing the pandemic did was create remote workers. Remote workers can live anywhere in the country because their job is working from home on their computer, tablet, or phone. They are leaving large cities to move into small and midsize cities because those cities offer an affordable cost of living. The work-from-home crowd may have caused home inventory shortages in small and midsize cities.

How to Resolve This

Even though the solution may be to build more inventory, lower mortgage rates, and lessen buyer competition, it is not that simple. Some factors listed are out of the buyers’ and sellers’ control. No one factor listed is more to blame than the other.

Real estate and building companies must handle individual situations in front of them as it happens. It’s the only solution for now.