What's Happening?
The U.S. housing market is experiencing a paradoxical situation where inventory is increasing, yet a significant shortage persists, driving up prices and limiting homeownership. According to J.P. Morgan,
the nation requires approximately 2.8 million more housing units to meet demand. This shortage has contributed to a decline in homeownership, which fell to 65% in the second quarter of the year, the lowest since 2019. Florida and Texas have been at the forefront of new housing construction, with both states leading in building permits issued. In 2025, Florida and Texas authorized 123,124 and 145,257 housing units, respectively. The South and West regions of the U.S. continue to dominate in housing permits, with the South alone authorizing 533,854 units. Despite this construction boom, apartment construction is slowing, which is expected to limit new rental supply and potentially increase rents by 2% to 3% next year.
Why It's Important?
The ongoing housing shortage has significant implications for the U.S. economy and society. The lack of affordable housing options keeps homeownership out of reach for many Americans, exacerbating economic inequality. The construction boom in states like Florida and Texas could help alleviate some pressure by increasing supply, potentially stabilizing prices and making homes more affordable. However, the slowdown in apartment construction could lead to higher rental costs, affecting renters nationwide. President Trump's administration has focused on increasing housing inventory as part of its policy agenda, proposing aggressive housing reforms and considering opening federal land for residential construction. The Housing for the 21st Century Act, a bipartisan bill, aims to streamline zoning and land use policies, which could further expand housing supply if passed.
What's Next?
The U.S. housing market is expected to undergo a 'Great Reset' as improvements in affordability gradually boost sales. However, this change is anticipated to be slow rather than immediate. The Trump administration's housing reform plans, including potential federal land use for housing, could significantly impact the market if implemented. The Housing for the 21st Century Act, currently moving through the legislature, could also play a crucial role in expanding housing inventory by modernizing zoning restrictions. If passed, this legislation could reach President Trump's desk by early 2026, potentially unlocking more housing inventory and addressing the affordability crisis.
