2019 U.S. Housing Market Outlook

We expect structural imbalances in the U.S. housing market will continue, leading to further tightening of fundamentals and higher shelter costs

• The most important issue in the housing market remains a persistent underbuilding of housing combined with accelerating demand for shelter.
• In 2018, housing demand exceeded supply by more than 400,000 units. We forecast that the U.S. will continue to underproduce housing by ~200,000 units in both 2019 and 2020, and vacancy rates should fall ~15bps each year.
• Housing availability is tight, with the vacancy rate of for-sale and for-rent housing at 3.2%, the lowest level since 1984.
• Constrained availability and further increases to replacement costs (labor, materials, land, and soft costs) should place upward pressure on rental rates and home prices.
  Higher mortgage rates negatively impacted homebuyer affordability, which we expect will drive incremental demand for rental housing going forward.