America’s Housing Shortage!

America’s Housing Shortage is Unprecedented!

America’s housing shortage is widespread! The housing market requires nearly 4 million single-family homes just to satisfy current buyers demand. That represents 50 percent more than in 2018. These numbers were from a Freddie Mac report disclosed in a Wall Street Journal piece.

Certainly this shortfall was due partially to pandemic-related moratoriums and investors buying up property for rentals, the real problem grew from a reduced production of new homes in the past 10 years. “This is what you get when you under build for 10 years,” said Sam Khater, Freddie Mac’s chief economist.

Sales of homes normally decreases with recession. This allows builders time to catch up to demand and “restock” the inventory. Because of the unusual circumstances with the pandemic, many left the urban centers for more space and less crowded areas. As a result, demand dropped and fear caused a shortage of qualified tradesmen to fill construction crews.

An economist for the National Association of Home Builders stated that 1.2 million new homes are now needed annually. This number should meet the long term demand according to the source. That number would require many construction workers to return to the job market soon. With stimulus money flowing and additional unemployment available, it doesn’t seem likely to happen.

The Shortage Really Hits Millennials

The millennial generation is buying homes at an increased rate. Agents are seeing the most of these buyers between the ages 24 to 40. Reports say homeownership among this group increased from 40% to 47.9 percent over the last 3 years. At the current rate of sales, there could be no more inventory by end of summer. Many owners are no longer planning to sell because there is no home to buy afterwards.

Then Came the Renters

Because of coronavirus-related concerns, many millennials made the decision to pack their bags and escape the city. As the pandemic spread over some major cities in March, rental agents saw a huge upsurge in demand for rentals. Some of these rental agencies reported  a five fold increase from the previous year. However, a  28 percent decrease in rental listings also occurred at the same time. Renters, who were in search of housing months before peak rental season, began reserving homes long-term, further saturating a market low in supply. One rental agent stated that she had never had so many requests for rentals as she had in June. She further stated that homes earmarked for makeovers for sale were quickly repurposed as rentals in order to meet demand. In rare cases, renters have turned into buyers since they were spending more of their time away from the city.

Conclusion

While no sure predictions exist, it does seem that one thing is certain. That one thing is that it will doubtless be another year before the inventory of homes increases enough to make a difference. Builders in the Phoenix market (for example) are already selling homes that are not scheduled to be finished till the end of 2021. If the usual enthusiastic contractor miscalculation is at play, that date is likely off by 3 to 6 months.

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