Bank of America breaks down the 4 cities facing the biggest housing shortages right now — and the 3 where there’s still plenty of room
- A recent report by the Bank of America Institute compared population with housing supply.
- The results were the 4 cities with the most housing available now, and the 3 cities with the least.
- San Antonio, Dallas, Orlando, and Houston have high population growth and low housing supply.
Homes are difficult to come by these days, according to Bank of America data.
In a recent report, Anna Zhou, an economist at the Bank of America Institute, stated that housing supply is unusually constrained right now, as measured by months’ supply. This common housing availability calculation counts the number of months it will take for a market’s housing inventory to run out if sales remain steady.
According to the National Association of Realtors, housing supply in the United States measured 3.1 months in June, well below the 2015-2019 average of 4.2, Zhou wrote.
But, as Zhou pointed out, the data isn’t perfect. Months’ supply, for example, only accounts for active listings and pending sales, not the total number of houses available, she wrote.
That’s why Zhou decided to examine local housing supply alongside Bank of America data to get a better picture of where the US housing market stands today — and which cities have the fewest available homes.
4 cities with hot labor markets and constrained housing supply
Zhou used Census Bureau data from 2022 to calculate total housing units county-by-county in metropolitan statistical areas, or MSAs — in other words, cities — to better analyze today’s housing market. She then calculated the housing unit-to-population ratio at the time. Finally, she compared this ratio to Bank of America data from the second quarter of 2023 on year-over-year population changes in these cities.
To better understand the findings, Zhou created the chart below, which divides the country into quadrants based on housing units compared to population ratios.
Zhou classified each quadrant based on the housing trends she discovered. For example, the “hot” group is the bottom-right quadrant, which includes cities in green and has a low housing supply combined with an increasing population.
Cities in the upper-right quadrant, such as Tampa and Jacksonville, fall into the “warm” category, which means they have a high housing supply as well as rapid population growth. Cities in the bottom-left quadrant are in the “cool” category, with a limited housing supply and a declining population.
Finally, cities in the upper-left quadrant, highlighted in red, have a high housing supply but a declining population, placing them in the “cold” category.
Zhou singled out San Antonio, Dallas, Orlando, and Houston as “hot” cities with high population growth but limited housing supply.
According to Zhou, the reason for the population influx in these cities was their hotter-than-average labor markets.
“For example, in Dallas, seasonally adjusted total nonfarm payroll was 14% higher in June 2023 than in January 2019, and 10% higher in Orlando,” Zhou wrote. “This compares to a national increase of 4% in total nonfarm payrolls.”
Unsurprisingly, the combination of rising population and limited housing supply has caused home prices in these markets to rise in recent years. Home prices in Orlando are up 58% since June 2019, while prices in Dallas are up 49%.
Fortunately, it appears that some relief is on the way. “Looking at the potential number of units coming through the pipeline, all four cities saw higher-than-average permits issued per capita during the first five months of 2023, with Houston leading,” Zhou wrote. “According to BofA Global Research, new multifamily completions are set to hit a record high in 2Q24, as COVID-related delays are finally resolved.”
Furthermore, smaller construction firms in San Antonio, Dallas, and Houston are all spending more than the national average, indicating that housing will be built in these hot markets in the coming years.
3 cities with room to spare
Cities like St. Louis, Detroit, and Miami, on the other hand, fall squarely in the “cold” quadrant due to high housing supply but outgoing populations.
Zhou observed that the populations of St. Louis and Detroit have declined significantly since 2008. Miami, on the other hand, has been a success story in recent years, as its population has skyrocketed following the pandemic. However, former residents have been leaving the city in droves in the last two quarters, according to Zhou, possibly due to high living costs.
“While home price appreciation in Miami has remained elevated thus far, longer term downside risks could grow if such exodus trends continue,” Zhou wrote. “This is especially true given that new construction in Miami has increased at a much faster rate than in St. Louis and Detroit, resulting in a rapid increase in housing stock.”
Population and housing market trends across the US
Population growth and declines are important indicators of a housing market’s health, which is why Zhou paid close attention to recent migration trends. Zhou was able to analyze the population growth of 27 major MSAs across the country using Bank of America data from customers with open accounts between the fourth quarter of 2018 and the second quarter of 2023.
Thirteen of the 27 cities experienced year-over-year population growth. Jacksonville, Florida, and Columbus, Ohio, were the biggest winners, while Charlotte, Nashville, and Las Vegas all saw their population growth rates accelerate between the first and second quarters of this year.
Meanwhile, some of the country’s largest cities saw the greatest population declines, with populations in San Francisco, New York, and Boston falling by less than 1% year on year. Miami and Portland, Oregon had the highest rates of population decline between the first and second quarters of this year.
Los Angeles lost 0.8% of its population year over year, though Zhou noted that this may help the city’s current housing shortage, given that it had the lowest housing unit-to-population ratio of the cities she studied.
