A decade ago the American housing sector lost about a third of its value when it was at the forefront of the financial crisis and a deep recession. Over the past decade, housing prices have recovered most of the losses, led by a robust job market which fueled the pickup in economic activity and housing demand.

But as the following chart also indicates, housing supply has not been able to keep up with rising demand, making homeownership less affordable. New starts in the U.S. leveled off this year, and sales of new single units have been declining. Moreover, U.S. house prices are still rising faster than inflation and money wages.

Annual average earnings growth remains below 3% even as house price increases have averaged more than 5% over the last few years.

Consequently, it is likely that an acute shortage of affordable homes in the United States will continue to be the case over the next couple of years. Ironically, at the margin, residential construction activity has recently been shrinking America’s GDP this year.