Starter Homes For People Are Not Coming

  • February 29, 2024
  • 3 min read

The Housing Shortage Crisis

  • Understanding the Magnitude of the Shortage We’ve talked in prior videos about 5 million, 3 million, and 6 million; it appears now that there’s 7 million homes short for the US housing market. That’s how many more houses are needed versus what the current inventory is.
  • The Origins of the Shortage: How did that shortage happen? It all started back in the early 2000s. There were some laws passed that made it easier for people to get mortgages if they did not qualify. So, a lot of people bought houses that maybe couldn’t normally get a mortgage. Some people bought two or three homes, either flipped them, rented them out, or kept them empty. Then came the housing crash in 2008, where a lot of these homes became foreclosed and were taken off the market.
  • Impact of the Housing Crash: The more insidious effect was that builders stopped building. Many went bankrupt, especially those involved in speculation. They couldn’t sell the houses, so they stopped being builders. For the next 10 years, from about 2007 to 2017, builders were very gun-shy about building homes. They built the bare minimum, often not even building speculation homes. This led to a significant housing shortage over more than a decade.
  • The Perfect Storm Then, in 2019 and 2020, COVID-19 hit. People who were renters now wanted to buy homes, exacerbating the inventory shortage. It was the combination of these events that created the perfect storm for the housing shortage we’re facing now.

The Demise of Starter Homes

  • What Happened to Starter Homes? Are we finished with starter homes? What in the world happened to the starter home concept? Low square footage, relatively cheap, and not full luxury, but at least livable. Now, even homes that were once considered starter homes are priced exorbitantly high. For example, a home that was purchased 20 years ago for $300,000 is now listed for $800,000, yet it’s only 776 square feet.
  • Advice for Buyers In such a market, what can buyers do? The best suggestion is to buy the cheapest house you can afford, even if it’s not your dream home. That way, you’re in the housing market and can ride that wave.

Addressing the crisis

  • Recognizing the severity, according to the National Association of Home Builders, sky-high home prices and housing shortages are here to stay unless the US builds its way out of the crisis.
  • Calculating the need: With 7 million homes short, how many homes per state is that? On average, there are 150,000 homes per state. Adjust accordingly based on the size of your state compared to the average.
  • Innovations in Construction: In response to the crisis, innovative solutions are emerging. For instance, a company in Boston is building an army of robot construction workers. Starting with commercial properties, this technology may soon be applied to residential construction.

Conclusion and Discussion

  • Looking to the Future: The housing shortage crisis is complex, with implications for both the building industry and aspiring homeowners. With starter homes disappearing and interest rates fluctuating, the future of the real estate market remains uncertain.
  • Join the conversation. What do you think about the future of the building industry, real estate, and construction careers? Share your thoughts in the comments below.

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