anyone out house hunting right now knows the pickings are slim the competition is fierce and the prices are high but one analyst claims there are actually too many houses being built the supply of homes for sale at the end of august totaled 129 million units down 15 from july and down 134 from august 2020 according to the national association of realtors that represents a 26month supply at the current sales pace which is one of the lowest supplies on record a 6month supply is considered a balanced market between buyer and seller one analyst dennis mcgill director of research at zelman  associates however argues that the current supply of homes for sale is not indicative of the overall need to build more houses demand is strong right now he argues because of an unusual emotional surge driven by the pandemic demographics which are a better measure of housing demand historically do not support more construction there is a downward trajectory of population growth household formation as well thats really going to undermine the need for whats built said mcgill on the other side of that you have the development community thats actually very optimistic about there being a housing shortage and actually very optimistic about how much needs to be built and theyre actually pressing the accelerator harder than we think they probably should be mcgill argues that demand demographically is on a downward trajectory he cites data from the latest decennial census from the us census showing household formation is about 24 below where it was in the prior four decades ivy zelman mcgills partner who is perhaps best known for one of the first warnings about the subprime mortgage crisis over a decade ago agreed the market is too hot there is just a massive amount of capital thats coming to the space said zelman of all the investor interest in the housing market we actually believe the industry is already overbuilding in singlefamily to normalized demand by roughly 20 and about 10 for multifamily so we couldnt be on more of an opposite side of where the market is and where the industry is frankly homebuilders however would seem to disagree housing starts are still not where they were over a decade ago but they are slowly crawling back and homebuilder sentiment is high the stocks of the nations public homebuilders have also been on a tear although that is largely due to pandemic demand i have seen ivys thesis and do agree population growth is slowing and thats a reason why the old normal combined singlefamily and multifamily construction of 18 million starts per year is too high said rob dietz chief economist with the national association of home builders