Housing Shortage Keeps Growing, Pressuring Buyers
Buyers and renters should expect affordability pressure to persist as the shortage widens and Fed rate expectations stay elevated.
Updated on Nov. 5, 2026 in Residential
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Democrats regained control of Congress in the midterm election, and housing policy is expected to move up the agenda, according to Oxford Economics economist Bernard Yaros. Households looking to buy or rent face a supply shortfall that analysts say is widening each year.
Why it matters
Yaros argues that construction, not demand-side incentives, should be the main policy focus, since down payment assistance can push up demand and, with limited supply, feed into higher prices. Oxford Economics also expects the Federal Reserve to keep a hawkish tone, which keeps mortgage rates a key factor in affordability.
Estimates of the U.S. housing shortage range from 3.5 million units to 4.03 million, and the gap is growing by about 50,000 units each year. The NAHB/Wells Fargo Housing Market Index fell again in October as builders' sales expectations dimmed.
The players
Oxford Economics
A forecasting firm whose economists model how Fed policy and mortgage rates will shape household borrowing costs.
Federal Reserve
The central bank whose rate decisions set the direction of mortgage rates, credit card APRs, and savings yields for households.
Freddie Mac
A government-sponsored mortgage company whose estimates of the housing shortage inform lending and affordability policy.
Realtor.com
A real estate listings platform whose housing supply data shows how many homes are available to buyers and renters.
The details
Construction has been lagging household formation, so the shortage keeps widening. Yaros says the drag from mortgage rates on demand is a larger problem than supply constraints, which means that when rates stay high, buyers hold back and the pressure on available homes shifts. Down payment assistance adds demand, and if supply stays limited, that demand tends to show up as higher prices. Oxford Economics expects the Fed to keep rates elevated, with possible hikes in December and March.
Timeline
November 5, 2026: Article analyzing Congress, housing, and the Fed outlook is published.
October 2026: NAHB/Wells Fargo Housing Market Index falls on weaker sales expectations.
December 2026: Oxford Economics expects a possible Fed rate hike.
March 2027: Oxford Economics expects a possible Fed rate hike.
2027: A resolution of the Iran war would be needed to ease inflation.
Money Landscape
The Harvard Joint Center for Housing Studies has documented a persistent gap between new construction and household growth. The current estimates of a 3.5 million to 4.03 million unit shortage place today's affordability pressure in the context of that multi-year trend.
If you are planning to buy, mortgage rates and home prices are both under pressure from the shortage and the rate outlook, so the affordability of a purchase can change quickly. Renters and buyers should review their housing budget and check current rates with a qualified mortgage professional before making a decision.
The takeaway
The housing shortage is growing by about 50,000 units each year, so affordability is unlikely to ease quickly. Track the Fed's December and March decisions and review your housing budget with a qualified financial professional before committing to a purchase.
What happens next
Oxford Economics expects Fed rate hike decisions to be weighed at the December and March meetings, and the outlook on housing policy will depend on how the new Congress acts.
Further reading
For context on how housing supply shapes the market, explore our Residential coverage.
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Should the federal government prioritize building more homes over helping people buy them?
