The 80% Housing Shortage Mistake
For five years, we were told the same story:
America has a massive housing shortage.
Five million homes short.
Six million homes short.
Seven million homes short.
It was repeated by media outlets, investment banks, trade groups, and housing economists.
Now?
JP Morgan just revised the shortage estimate to 1.2 million homes.
That’s not a small adjustment.
That’s an 80% miss.
So what actually happened?
Let’s break it down.
The Shortage Narrative (What We Were Told)
Here’s what the major institutions said:
National Association of Realtors (2020): 5.5 million homes short
Other NAR estimates: as high as 6.8 million
Freddie Mac: 3.8 million
Zillow: 4.5 million
NLHC (rental market): 7.1 million rental units short
These weren’t fringe opinions.
They were consensus.
But now JP Morgan says:
The size of the housing shortage has been overemphasized — closer to 1.2 million homes.
That’s nearly an 80% discrepancy from the highest estimates.
And here’s the real problem:
If we were truly 5–7 million homes short…
Why are prices falling?
Why are rents falling?
Why is inventory stacking?
Demand Shock ≠ Housing Shortage
The mistake was confusing a pull-forward demand shock with a structural shortage.
From 2020–2022, we effectively pulled five years of demand into two years.
Ultra-low rates
Migration to the Sunbelt
Remote work
Investor speculation
Pandemic stimulus
Mortgage applications exploded.
Then collapsed.
Get the FULL Set of Charts HERE
Today, mortgage applications are below Great Financial Crisis levels.
That’s not a shortage environment.
That’s a demand contraction.
If we truly had a multi-million unit structural shortage, we would not see:
Record low contract signings
Existing home sales near GFC lows
Unsold completed homes at highest levels since 2009
We didn’t have a shortage. We had a demand spike.
Inventory Is Quietly Back
Nationally, inventory has climbed back toward 2019 levels.
But in the Sunbelt?
It’s much worse.
Compared to pre-pandemic levels:
Florida inventory: +29%
Texas inventory: +32%
And that’s only what’s listed.
Builders are holding back inventory.
Permitted lots are sitting idle.
New communities are paused.
The overbuild is real.
The “Inventory Is Falling” Illusion
Some analysts recently pointed out that active listings in Jacksonville were down year-over-year.
Sounds bullish, right?
Not exactly.
Here’s what’s really happening:
Many listings expire December 31 (up to 25% of active listings)
Sellers pull properties off market for 31 days to “reset” their day count clock
Frustrated owners “rage quit” waiting for higher prices later
I call it rage quitting.
Sellers list high.
They don’t get their price.
They blame the agent.
They pull the listing.
They wait for “busy season.”
But those homes are still there.
They’re just temporarily off MLS.
This is pent-up supply — not tightening supply.
Affordability Is the Real Driver
The market today is not rate-driven.
It’s price-driven. The math and low demand (despite mortgage rates coming down more than 1%) proves this.
To buy the median home in America with 5% down, you need to earn:
$117,000/year
Median household income?
$86,000
That’s the gap.
House payments are near 40% of median income — levels historically associated with reversals.
To return to historical median home-to-income ratios, prices would need to fall roughly 26% .
Understand - that’s not doom. That’s math.
The Sunbelt Problem
Florida, Texas, Tennessee, Colorado — these were speculative, high-velocity markets.
They saw:
Massive migration
Heavy investor participation (25–30% in some markets)
Aggressive new construction
FHA/VA concentration in new communities (in some cases up to 60%)
Now?
Rents are down 20% in some areas
Investors demand lower purchase prices
Negative equity is rising
Short sales are appearing
Migration Is Slowing
One of the biggest drivers of the “shortage” narrative was migration:
California → Florida
New York → Texas
But net migration into Florida has slowed dramatically.
Affordability killed the flow.
Now demand is shifting to the Midwest — the most affordable markets in the country.
Buyers follow affordability. Always.
What Happens Next?
Real estate adjusts slowly.
Then suddenly.
Inventory rises.
Transaction volume slows.
Prices get sticky.
Sentiment shifts.
This doesn’t resolve in months.
It can take years - even more than a decade.
Especially when:
48 million baby boomers will sadly pass over the next decade
Migration slows
Rental math and opportunity cost for buyers breaks
Investors step back
The shortage narrative is collapsing.
And once sentiment flips, it doesn’t flip gently — especially in the Sunbelt markets.
The Big Question
If you’re a renter:
Why would you buy when you can rent the same property for $1,000–$1,500 less per month?
If you’re in the Northeast:
Are you prepared for inventory normalization over the next decade?
If you’re in Florida or Texas:
Are you watching negative equity and builder supply carefully?
Final Thought
We didn’t have a housing shortage.
We had:
A demand shock
A liquidity shock
A rate shock
A migration shock (and even an immigration shock)
Now we’re seeing the air slowly release from the balloon.
The 80% revision tells you something important:
The institutions were modeling assumptions.
The market was living reality.
And reality always wins.
If you want deeper breakdowns on the data — connect and reach out. If you’re looking for a top agent in your market, I am happy to put you in touch - jon@movewithmomentum.com.
Want to dig deeper, visit thinkbigquestioneverything.com.
Two other items:
1) Actual Impact. I’ve been working on housing affordability solutions behind the scenes. Not just data, actual impact conversations. Thank you to those of you who are listening and thinking differently. The connections through Substack, X, and YouTube have been phenomenal. I never could have imagined connecting with so many wonderful people across Florida and the country.
2) Real Estate Book. Lastly, I am working on a real estate book that helps agents navigate getting out of real estate (by winning) and having the choice to continue selling, or retiring. I am excited to get this project worked on and hopefully released by my 35th birthday in April.
Cheers and keep crushing it!
