What are the long-term effects of low housing supply on prices?
What are the long-term effects of low housing supply on prices?
A persistent low housing supply tends to put upward pressure on home prices over time. When demand outpaces supply, buyers compete for fewer homes, often bidding up prices. This can lead to affordability challenges for new buyers, particularly in highly desirable locations. Over the long term, sustained low supply can exacerbate housing shortages, forcing more people to rent or settle in less ideal areas. This could also trigger an increase in rental demand, raising rental prices. Additionally, investors may flock to these markets, driving prices even higher. To resolve this, solutions like increased housing construction or regulatory changes may be necessary.