The Expert Podcast

By some measures, the U.S. housing market is short by many millions of homes in order to fulfill the demand from new home and resale home markets. So, what is the solution to this? What is the reason for it? Well, this is a really good article from Investopedia that talks about three factors that have gone into creating the shortage of homes over the last decade.

The first factor started out in 2010 when the housing market crashed after the financial crisis. Many home builders got out of the market. They stopped being a business, went bankrupt, or closed because nobody was buying new houses. Many builders had put money into investments of homes that failed, so they were basically bankrupt. It took many years for builders to come back into the marketplace. Some people who were skilled tradespeople and craftsmen stopped working in the construction industry, retired, and went to do something else. When demand started to come back around 2016-2017, many had already moved on to other things.

So, the backlog of skilled tradespeople and construction companies was thinned out by then, and it took a while to ramp things up. Then, in 2019, there was a huge wave of demand from people because of the pandemic. They wanted to buy a different house and move to a different area, especially to the suburbs. As a result, prices went up dramatically. Prices went up from an average price of about $220,000 to about $450,000. At the same time, interest rates went from 2% to 7%.

Suddenly, in 2020, instead of a mortgage payment on an average house being about $1,100, it was about $3,500. What that did was it made it so that new home construction again slowed down because builders didn’t want to take the risk of building these houses and not being able to sell them.

Then, there was a pipeline problem—a supply line problem—where the supply chain for things like lumber, paint, materials, building supplies, and nails was backed up because of the pandemic, but also because of inflation. It became tough to get inventory of these items. Plus, the lumber prices went through the roof. At one point, lumber prices went from $400 to $500 per thousand board feet to $1,500 per thousand board feet. This created a problem.

Then, the last issue that happened was permitting problems and labor shortages. There’s never been a good catch-up for home building over the last 15 almost 20 years, and that’s contributed to the shortage of homes.

How can that be fixed? Well, it’s not an overnight fix. Building a house is not like building a pen that you want to sell or even building a car. You can build a car in a week or so at a factory, but houses take months of planning, zoning, laying out lot lines, permitting, surveys, getting construction materials, and equipment. Then, building the house can take three or four months, or even a year from start to finish. It doesn’t happen overnight. And during that year, if anything bad happens with the economy, builders pull back.

This is why there’s a shortage of homes. There’s not an easy fix to it. A lot of people say, “Well, change the zoning so you don’t have to have only single-family zoning.” That’s not going to change all the other problems. So, this housing shortage is kind of here to stay, and it’s making home ownership a lot more difficult due to the high cost and limited available inventory.

Thank you for watching another episode of Actual Human Advisory on Describe TV. Remember, we have live one-on-one consultation appointments available at ActualHum.com, where you can book a one-on-one, undivided attention, live call with a licensed investigator, a licensed insurance broker, a licensed mortgage broker, a real estate broker, and I’m also a certified real estate title examiner and a certified civil court mediator. Along with that, I’ve developed and started over 15 businesses, several of which were sold for millions of dollars. So, if you do have questions in any of those categories, you can arrange a one-on-one live video consultation. Use the link below, and we’ll see you on the next episode.