Holden Lewis, Nerd Wallet
If the sign for sale in the front yard was a living thing, it would have a lifespan of fruit flies.
Of the homes sold in March 2021, 83% were on the market in less than a month. Homes sell fast because they are not enough to accommodate all the households that want to own a home. According to April 2021, the shortfall at the end of 2020 was 3.8 million units. Blog post By Freddie Mac Chief Economist Sam Carter.
How the house came here
To visualize this shortage, imagine the national real estate market as a musical chairs game with a twist. Chairs are added to the circle every time a million homes are built, and every one million households a new player dances into the room. It is formed by population growth. From 2007 to 2020, the number of chairs increased from 130 to 141. But if Khater’s calculations were correct, he needed about 145 chairs to meet the demand.
Lawrence Yun, Chief Economist of the National Association of Real Estate Agents, said:
The lack of housing shattered hope. Forty-five percent of those looking for a home for at least three months in early 2021 said, ” Bidding war, “According to a survey by the National Association of Home Builders.
As a result, home prices are rising rapidly. According to the NAR, the median existing homes rose 17.2% to $ 329,100 in the 12 months to March 2021. At the sales pace in March, there was only 2.1 months’ worth of housing supply, which is close to the lowest ever.
Signs for sale are not only short-lived, but also endangered.
Why it’s missing
Housing shortages have arisen from many factors. Robert Dietz, NAHB’s Chief Economist, blames the lack of “five Ls.”
- Shortage of skilled workers.
- There are not enough development lots to build.
- The cost of a loan to raise construction funds.
- Prices for wood and other materials.
Its final items include zoning and building codes, labor law, requirements for securing green space in development, and things like “exclusive zoning that requires a minimum lot size, so buyers do. You have to buy more land than you would otherwise, “says Dietz.
Dean Baker, a senior economist at the Center for Economic Policy Research, is not convinced that zoning has many responsibilities. “In 2010, 2011 and 2012, the limits weren’t as sudden as they were when we were building 2 million units a year in 2004, 2005 and 2006,” Baker said. I will. “Therefore, I don’t think zoning will explain the change.” He thinks the construction is inadequate because he became cautious after the crash of the house in 2008.
Will the market crash again?
In 2005, I was a reporter, but I wondered if I was in a housing bubble. Most housing economists told me we weren’t.
Baker was an exception.
He was convinced that we were in a housing bubble, so he could sell the condominium in 2004 and rent a place, and after the price fell, he could use the sale price of the condominium to get a bargain. I was confident that I could do it. Less than three years after he sold his condo in the District of Columbia, prices began to fall there.
If you’re afraid of repeating history, think of it as comfort. Baker and I correctly thought we were in a housing bubble in 2005, but neither think we were in a bubble this year.
I don’t think home prices will plummet, but you can get caught up in fender vendors. 30-year mortgages have fallen below 3.5% since April 2020.
Baker said: “What happens when the mortgage rate reaches 4%? This isn’t high by historical standards. Will the price go down? My guess is probably. It’s not a crash, but there is downward pressure on prices. Yes, prices are rising rapidly, not because buyers are rushing to make money, but because demand exceeds supply. “
Today’s residential landscape is different from the beginning of the century. The housing bubble began in 2003 and was boosted by inadequate mortgage standards and greed. Flippers bought homes as a short-term investment, believing that prices would continue to rise. But today, regulators are enforcing stricter lending standards and changing the way we think about buying a home. Prices are rising rapidly, not because buyers are rushing to make money, but because demand exceeds supply.
Who will lose?
It’s easier for economists to identify who is being harmed by the hot housing market than to identify who will benefit from it.
“These high housing costs have had a particularly big impact on millennials,” Freddie Mac’s Khater wrote in a February 2020 blog post. “To overcome these cost barriers, some young adults are looking to shared living arrangements. Others go home with their parents, resulting in 25-34 years old. More than 400,000 households by the age of age are missing (households that should have been formed except for rising housing costs). “
Some economists speculated that millennials weren’t interested in home ownership six or seven years ago, according to NAHB Dietz. It wasn’t. “People really confused the lack of means with the lack of desire,” says Dietz.
Millennials wanted a home in 2014 and 2015, but couldn’t afford it because of slow wage growth and student loan debt.Now those same millennials are moving further into their careers and earning more, and Mortgage interest rate Historically low, but there aren’t enough homes to go around.
“It’s a frustrating market,” says Dietz.
Who will get it?
in the case of Hot real estate market It frustrates millennials, but who will satisfy them?
Homeowners may feel warm about tracking the value of a home online. Sellers may feel satisfied when collecting offers and anxious when making offers at their next home.
Then there is the landlord. According to the Census Bureau, in 2007, before the collapse of homes, there were just under 11 million single-family homes for renters. In 2019, the latest data available, there was just over 15 million data. Many of the additional 4.1 million rental homes were purchased by investors when prices plummeted due to a home plunge.
By renting these homes instead of selling them, does the landlord deny becoming a buyer the joy of owning instead of renting them?
“On the other hand, there is certainly an argument that single-family home buyers intend to rent and bring affordable home stock from the market that their families would otherwise buy,” said Senior Research Associates. Michael Neil says. For the Urban Institute. “But at the same time, these buyers helped stabilize the housing market in situations where demand was mostly on the sidelines.”
What can i do?
Khater wrote in his April 2021 blog post: “Simply put, we need to add more single-family entry-level homes to address this shortage. This has a strong impact on the wealth, health and stability of the American community.”
But how can you build a more entry-level (in other words, relatively cheap) home? Economists are proposing to relax the zoning code to give builders the flexibility to build denser homes. Consider a smaller lot size and high-rise multi-unit building. The Biden administration has proposed to subsidize local governments to revise the zoning code.
Neil proposes to eliminate labor shortages by connecting community colleges and builders to develop skills and rethink immigration policy.
There is a more direct solution if the market fails to build enough homes. Get the federal government to subsidize the construction of entry-level homes for sale to your home. This solution will increase the number of homes available to millennials. It will also allow young homeowners to build wealth instead of transferring it to old landlords in the form of rent.
The Biden administration has asked Congress to allocate a $ 20 billion tax credit over five years to build or restore about 500,000 homes for low-income homebuyers. This plan is called the Neighborhood Housing Investment Act, and the money will pay the difference between the development cost and the selling price.
500,000 homes can’t solve the 3.8 million shortage, but that’s the beginning.
Housing shortage hangs on, price crash unlikely – Press Telegram Source link Housing shortage hangs on, price crash unlikely – Press Telegram