THE HOUSING SHORTAGE
In this episode I want to tell you about the
THE HOUSING SHORTAGE and the factors driving demand in todays market
WHY DO WE HAVE A SHORTAGE?
WE ARE JUST NOT BUILDING AS MANY ENTRY LEVEL HOMES AS WE USED TO!
SAM KATER CHEIF ECONOMIST AT Fannie Mae brilliantly explains why
There is a fundamental shortage of homes in todays market
A good chunk of buyers in todays market are 1st timers.
WHAT IS AN ENTRY LEVEL HOME (for purposes of this discussion - 1400 sqft or less. The median single family home had about 2300 sqft per the census
Here’s the history entry level homes produced in the US
1970’s 418000 entry level homes per year on average
1980’s high interest rates (9-12%) 314000 units per year
1990’s decline in mortgage rates - increased demand single family home construction but supply of entry level homes declined to 207000 units a year
2000’s a rise in supply due to record low mortgage rates at that time and subprime products causing high demand but entry level supply of homes declined to 150000 units a year
2010’s entry level supply was at 55000 units per year
2020 entry level supply was estimated at 65000 units per year
The supply of homes constructed below 1400 sqft is at a 5 decade low
These high housing costs have hit the Millennial generation particularly hard. To overcome these cost barriers, some young adults have turned to shared living arrangements. Others have moved back home with parents. As a result, there are more than 400,000 missing households headed by 25- to 34-year-olds (households that would have formed except for higher housing costs).
Jacob Passy | Apr 16, 2021 article on new home construction Realtor.com says it all
Big picture
Pandemic encouraged many families to move to larger homes (even on outskirts)
Millennials - Having kids -prime buying years; low rates
Would be sellers are hesitant to move
Hence Homebuyers moved to new homes
Let’s talk about Housing in general because this is the
HOUSING COSTS DRIVEN UP because material costs have risen
Cost to build homes and project timelines for building
Not enough Lumber
Shortage of semiconductors (appliances)
Steel harder to Come by
SOURCES:
One of the Most Important Challenges our Industry will Face: The Significant Shortage of Starter Homes
Sam Khater is Vice President, Chief Economist and head of Freddie Mac’s Economic & Housing Research department
https://www.realtor.com/news/real-estate-news/new-home-construction-rebounds-as-america-faces-dire-housing-shortage
Jacob Passy | Apr 16, 2021