What’s with the housing inventory??

What happened to the housing inventory??

• Homebuilding hasn’t kept pace with population growth. In 2020 and the first half of 2021, the U.S. saw 2.1 million household formations, resulting in a total of 12.3 million household formations between 2012 and June 2021, according to Realtor.com. In that time period, only 7 million single-family homes were built and completed.
• The U.S. is now short 5.24 million homes, according to recent research by Realtor.com. That gap between single-family home constructions and household formations is up from a shortage of 3.84 million homes at the beginning of 2019

“The housing market has been struggling to keep up with demand since the 2010s, when the number of new homes built was slashed in half compared with the previous decade,” Forbes wrote. “As the demand for residential real estate has increased, the scarcity of homes for sale has created a logjam on the supply side.”

After the housing crisis that started in 2009/2010, there were factors contributing to our current housing shortages that we don’t often think about.

There was a needed correction in lending practices that made it harder for construction companies to build homes on “speculation”. That plays a factor in how many homes will be built before actual buyers have signed purchase and sale agreements. The recession also wiped-out thousands of small businesses and sub-contractors that larger builders relied upon to finish home building projects. These sub-contractors were impacted by the initial market/economic crash and lost basic tools (like trucks/vehicles) to continue building even if they could find work. Factories that made all the products needed by the contractors were unable to continue as well, impacting the supply of materials needed for home building.

That contraction in the economy was devastating for the housing industry and its ability to maintain continuity with supply/demand.

Once the economy picked back up and people started buying homes again, all these factors made it impossible to keep up with migration of people moving to cities for jobs that reappeared first.

Single-family homebuilding has suffered a severe labor shortage that began well before the pandemic, but it was certainly exacerbated by labor and supply chain issues amid COVID-19.

• “The coronavirus pandemic changed daily life worldwide. Being stuck at home led to a re-examination of home life, resulting in increased housing demand across the country,” Realtor.com wrote. “However, as housing demand ramped up, the construction industry ran into issues with material and labor scarcity, driving the cost of both inputs up and widening the already large gap between home construction and household formations. Housing demand was strong enough that these hang-ups did not stifle home sales growth, but these trends exacerbated the preexisting shortage, making the problem worse.”