“The pandemic shifts and resurgence of the residential rental market brings new residential supply into focus,” says Doug Ressler, manager of business intelligence at Yardi Matrix. “Lack of entry-level housing supply and rising home prices will show the multi-family rental market demand increasing as new renters enter the market and Millennials extend their rental commitments.”
Construction Highlights
The NAR Claims There’s a Chronic 5.5 Million Shortage of Houses
I did not buy the NAR’s line then and I certainly don’t today.
Starts and Households Since 2000
There were 25,107 starts and 23,341 new households. Starts were sufficient to cover households.
However, we do not know how many people wanted houses and did not get them. Nor do we know the numbers of houses that were torn down.
Starts and Households Since 2010
Interestingly, since 2010 the US added 14,760 households but only 11,866 new houses.
Given the definition of household, the above numbers may seem impossible.
The apparent conundrum has an easy explanation: There was a pool of existing houses sufficient to accommodate millions of new households.
Underbuild or Overbuild?
Did we underbuild since 2010 or overbuild from 2001 to 2008?
Both? Neither?
Always a Shortage at the Top
Amusingly, the NAR argued in 2007 that there was a shortage of houses. Clearly there wasn’t.
At every market peak, there always appears to be a shortage.
That does not imply this is the peak. Nor does it suggest anything about a shortage.
Why Are Buyers Aggressive?
Let’s not confuse a genuine shortage with an artificial shortage due to monetary stimulus by the Fed and free money stimulus from Congress coupled with a booming stock market bubble.
If the Fed was not manipulating rates lower and openly encouraging speculation in assets, I bet the apparent shortage would vanish.
Affordable Housing Fiasco
In reality, there is no shortage, so some state it this way: “There’s a shortage of affordable homes.”
For that problem, please look at the cheap interest rates from the Fed and scores of programs at every level (Federal, State, Local), that encourage ownership.
Every “affordable housing” program for decades has increased demand, driving prices up.
Homes were actually affordable following the housing crash in 2009. Governments and the Fed did everything they could to drive prices back up.
When homes were affordable, neither the Fed, nor the banks, nor local governments were happy.
Hooray, they are all happy now that they can again launch more “affordable housing” programs!
Addendum
Surpluses and shortages can exist locally even if there is enough housing overall.
For example, people constantly move out of Illinois to Texas, Florida, and even Indiana.
But the NAR’s estimate and methodology of lumping it all together concluding a shortage of 5.5 M homes is nonsense. It neglects overbuilding, and most important attitude changes.
Millennials and Zoomers are more prone to be flexible in jobs, moving, and housing than their Boomer parents. The Fed and Congress temporarily suppressed that trend but for how long?
Demographically speaking, a big wave of boomer deaths is on the horizon. That will add to housing supply everywhere, but more so in Florida cities than Austin.
There is not a one size fits all as the NAR tried to do with its self-serving calculation.
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