The Expert Podcast

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? Are there enough materials? Are there enough employees to build houses? Well, let's take a look at what the experts say.

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 7 million houses, which creates a housing supply issue. There's a shortage of 7 million homes right now, and there's really no pathway to build that many. If only single-family homes are considered, the rate of housing starts would need to triple to keep up with demand in 4 to 5 years. So, 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.

It will require sustained new construction activity, and likely that will continue to be an issue because it's not likely that new construction is going to pick up. The builders that are out there have been decimated by interest rates, supply chain issues, and some are still ramping up from the housing crash in 2008. Bottom line is that if the market continues as it is now, it's unlikely there will be a big shift. 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.