The Housing Shortage Appears To Be Permanent

  • April 5, 2024
  • 2 min read

The Reality of the Housing Market
Okay, so there’s a shortage of houses. We know that house prices are through the roof, and the process of trying to find a house to buy is impossible. So just build more homes, right? Well, here’s a problem: how long would it take to build enough homes? Are there enough builders, materials, and employees to build houses? Let’s take a look at what the experts say.

The Severity of the Shortage
The shortage is extreme. The gap between single-family housing starts and household formations is 7 million per year. So every year, we’re running short by 7 million houses per year, creating a housing supply issue. There’s a shortage of 7 million homes right now, and there’s really no pathway to build that many.

The Challenge of Construction
If only single-family homes are considered, the rate of housing starts would need to triple to keep up with demand in four to five years. Basically, the construction industry would have to build three times as many houses as they are now, and it would still take 4 to 5 years to build as many houses. So, it may never happen.

Factors Limiting Construction
It will require sustained new construction activity, and likely, that will continue to be an issue. Builders have been decimated by interest rates and supply chain issues, and some are still ramping up from the housing crash in 2008. Bottom line: if the market continues as it is now, it’s unlikely there will be a big shift.

Future Prospects and Recommendations
The housing market isn’t going to have a ton more inventory anytime soon. So, plan accordingly. If you can find a builder that can build a spec house, maybe put an addition on a house or build an ADU. That might be a way to go. But in the meantime, houses aren’t going to magically appear in any significant volume.

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