Candace Taylor writes over at The Wall Street Journal reports that 2020 was an odd year for housing. The U.S. real-estate market went from essentially shut down to an unprecedented rally. As a result, a lot of areas and price ranges are seeing unprecedented inventory shortages…
- Not surprisingly, the inventory shock has happened in “vacation destinations, such as Cape Cod and the Jersey Shore, and exurbs of major cities that were once too far away for commuters.”
- On the flip side, luxury housing markets have seen a lot more houses come on the market. “Most of these are dense urban areas with a large proportion of condos and co-ops, or single-family houses on small lots…”
The journal breaks down the housing market in some of these hot markets like Cape Cod, Massachusetts, Jersey Shore, New Jersey, and the exurbs of Washington D.C… (Wall Street Journal)
So when is inventory going to catch up with demand? In all honesty, there is not a lot of good news there. Obviously, if the stock market tumbles, which some are concerned about, you could see demand cool. And if work returns to normal and the majority end up going back to the office you could see demand in some of these communities drop off.
However, if demand remains steady Ben Caballero over at Inman has some bad news for you. He predicts that it could take six years for the housing market to meet the demand for houses because of years of underbuilding after the housing crash…
- The historical average of new homes is 1.1 million per year. Caballero argues that “Thinking optimistically and knowing a little about U.S. homebuilders and American ingenuity, builders might create an average of 2 million homes annually and achieve a supply-demand balance in about six years.”
- Caballero notes that if we are only able to increase capacity 50% it would take 13 years for new homes to match demand.
Caballero also has a good breakdown of how we got in this situation that goes all the way back to the 1973 OPEC oil embargo…. (Inman)
If we have been severely under-building houses for decades. Unless demand drops off drastically or we discover some new to rapidly build homes we could be in a sellers market for longer than I think many are expecting.