Garage Door Shortage the Latest Achilles Heel for Housing

Housing affordability is expected to slip, but not fall, in 2022.

The great American dream continues to be a nightmare for many first-time homebuyers. The good news is the current housing shortage will keep American homebuilders busy as they continue to deal with pandemic-related challenges.

Homebuilders have endured a run on lumber, an under-supply of bricklayers, sick subcontractors, back-ordered appliances and plumbing fixtures still boxed in containers out at sea. 

Most renters looking to buy a home list a garage as a requirement to house their automobiles and store their personal belongings. Unfortunately, builders are finding garage doors to be the industry’s latest supply-chain nightmare. It used to take 20 weeks to build a house. Now it takes roughly 20 weeks to get a garage door.     

In addition to supply-chain bottlenecks, home affordability is becoming a barrier for prospective buyers. Affordability hinges on three attributes: household median income, home price appreciation and mortgage rates. All three are expected to increase, although home-price appreciation is expected to slow to around 5 percent. That leaves household median income and rising mortgage rates as the two factors working against one another in determining whether you can afford a home or not.   

Housing experts believe strong momentum in the housing sector will continue in 2022, provided the 30-year mortgage rate remains below 5 percent. Recent sell-off in long-term Treasuries pushed the 10-year yield above 1.8 percent. Thirty-year mortgage rates are closely tied to 10-year Treasury yields. While the movement is not always one to one, the spread hovers around 175 basis points. With the Fed ready to lift off the overnight Federal Funds rate, home sales may see a boost near term as buyers rush to get ahead of higher mortgage rates.

When the dust settles, pandemic-related migration and demographic changes will remain key reasons for housing to contribute positive growth in 2022. While the decline in affordability will certainly hurt some, it will not be enough to stunt growth in the sector in 2022. Next year could be a different story.