Housing starts - look at the shortfall from the pandemic, a lot of catch-up

Housing prices have exploded to the upside since the beginning of the pandemic. A key reason is the shortfall in housing starts. We took the trend in starts for the two years prior to the pandemic and extrapolated to the most current data. This trend was .88% per month. We then measured the difference between actual and trend. We then calculated the cumulative shortfall in thousands of homes. The shortfall is large. We are talking millions of units.  Without these new homes, existing homes will see upward pressure from buyers. 

Materials will also see upward pressure. One futures contact of lumber equals a railcar which has enough wood for 6-7 homes at 2,000 square feet. A back of the envelope calculation says that to close the shortfall there is needed 632,000 railcars or lumber contracts. While this is a gross simplification, it provides some context for the higher prices in housing.