347: The Housing Shortage Explained

If you’ve ever been cornered at a dinner party and asked “so… how’s the housing market?” — this episode is your new best friend. We sat down with Dr. Lawrence Yun, Chief Economist at the National Association of Realtors, to get a straight-talking breakdown of housing market trends for Realtors right now. And spoiler: the answers are more nuanced, more hopeful, and more personal than you might expect.

We recorded this conversation live at the NAR podcast studio in Chicago — which felt very fancy compared to our usual setup, just for the record. Dr. Yun has been with NAR since 2000 and stepped into the Chief Economist role in 2008 during the foreclosure crisis. He has testified before Congress, appeared on C-SPAN, participates in the Blue Chip Council and the Wall Street Journal Forecasting Survey, and was recognized for having one of the closest forecasts for 2024. He’s the real deal. And he was incredibly generous with his time and his answers.

The Housing Shortage Is Real — and Still in the Millions

Let’s start with the big one. The housing shortage in America is not a myth. Pre-COVID analysis from NAR put the shortage at around five and a half million units. Today, Dr. Yun estimates we’re still in the three to four million range. We are currently building about 1.5 million new housing units per year, and we need to get closer to two million — sustained over several years — to truly make a dent. That’s a long runway, which is exactly why policy changes focused on releasing existing inventory (think investor-owned rental properties) could move the needle faster than new construction alone.

National Data vs. Local Reality

One of the most practical takeaways from this conversation is something we already know as active Realtors: national data is a reference point, not the whole story. Dr. Yun pointed out that some markets have an overabundance of supply right now, while others — like much of New England — are still seeing multiple offers on well-priced homes. Understanding housing market trends for Realtors in your specific area is where your value to clients really lives. The advice? Work with the data, but know your local market deeply enough to translate it for your buyers and sellers.

Why First-Time Buyers Are So Stuck

Here’s the stat that stopped us in our tracks: the median age of a first-time buyer in America is now 40. Dr. Yun called it the most depressing statistic of last year, and we completely agree. Affordability challenges — elevated home prices (up about 50% from pre-COVID levels), higher mortgage rates, rising insurance costs, and a shortage of starter home inventory — have pushed younger buyers further and further back. The NAR Affordability Index accounts for home prices, income growth, and mortgage rates, but doesn’t yet include insurance costs, which Dr. Yun acknowledged would make the picture even more challenging if incorporated.

The Lock-In Effect and Where It’s Headed

About 60% of homeowners currently have a mortgage rate below 4%, which creates a powerful incentive to stay put. But Dr. Yun made an important point: 40% of homeowners across the country have no mortgage at all, meaning they can move anytime. Add in the life events that push people to sell regardless of rates — marriages, divorces, growing families, job changes — and the lock-in effect naturally loosens over time. His take is that the worst of it is likely behind us, and inventory will continue to improve heading into and beyond this spring buying season.

The Capital Gains Conversation Every Realtor Needs to Have

This was one of the most eye-opening parts of our chat. The capital gains tax exemption for home sales — $250,000 for single filers, $500,000 for married couples — has not been updated in 30 years. When it was introduced, those numbers felt large. But with home prices at record highs, many sellers are holding onto their homes specifically to avoid a big tax bill. NAR’s number one advocacy position right now is getting that exemption lifted or indexed to inflation. If it were, the figure would essentially double — and more sellers would feel comfortable listing, which would release much-needed inventory, especially in the price ranges first-time buyers can actually afford.

A Personal Story That Changes How You See This Work

We didn’t expect the conversation to go here, but we’re so glad it did. Dr. Yun shared that his family immigrated to the United States from South Korea when he was a child. Their original plan to settle in California was quickly abandoned — too expensive. They landed in Columbia, South Carolina, near a relative. His father, a teacher in Korea whose credentials didn’t transfer to the U.S., took a job at a textile factory and purchased a small home within months of arriving. That home was a starting point that led to trading up, building equity, and building a life. It’s the American dream in the most literal sense, and it’s the reason Dr. Yun sees his work as more than economics. Homeownership changes trajectories. As Realtors, we get to be part of that every single day.