4 reasons it will take a long time for US home supply to meet the extraordinary demand, according to BofA

Reuters/Mike Blake

• The housing market is on its way to normalization, but it'll take a while, Bank of America said.
• Demand is holding strong, but price pressures are intensifying and building costs are up.
• Here are four signals that it will take a while to balance out the market, according to BofA.

The housing market will normalize, but Bank of America advises against holding your breath about it happening soon.

The market has been running red hot for roughly one year. The Federal Reserve's March 2020 rate cuts dragged mortgage rates to historic lows and spurred a nationwide buying spree. Sales accelerated, but builders failed to keep up. By the end of 2020, the US home supply sat just above record lows.

Building activity has picked up somewhat this year, but Americans' outsize demand is still handily exceeding the national supply. And it's unlikely that the two will balance out anytime soon, Bank of America economists led by Michelle Meyer said Monday.

The recent dip in existing home sales is only the start of a "long journey" to restore market equilibrium, according to the team. A handful of trends suggest that while the market is set to cool, buyers will outstrip sellers for the foreseeable future.

Here are the four signals that point to a prolonged recovery for US home supply, according to the bank.