I’m old enough to remember when the housing deficit was just 4 million… (WSJ)
The Wall Street Journal is reporting that the housing supply is 5.5 million homes short, according to a new report from the National Association of Realtors (WSJ)
- Builders have been building. The NAR report estimates that U.S. builders “added 1.225 million new housing units, on average, each year from 2001 to 2020…” The average, unfortunately, is down from the 32 year period between 1968-2000 when builders averaged 1.5 million new units a year.
- Across the board shortage. Single-family and multi-family units are underdeveloped significantly. “The 5.5 million-unit deficit includes about two million single-family homes, 1.1 million buildings with two to four units and 2.4 million buildings of at least five units, the report says.”
- Relax, it’s worse than you think. If you thought 5.5 million was bad, I got some bad news for you. The report says that “…from 2010 to 2020, new-home construction fell 6.8 million units short of what was needed to meet household-formation growth and replace units that were aging or destroyed by natural disasters.”
POINT-COUNTERPOINT: Not everyone agrees with this report. John Burns, chief executive of John Burns Real Estate Consulting LLC, told WSJ that the deficit is actually closer to a million. “Our adult population isn’t growing as fast as it used to…we don’t need to build as much,”
So how do we solve this problem? This is easy, we build. The NAR lists a bunch of policy proposals but they are essentially the same thing. We need to make it easier and beneficial for builders to build. Hopefully, the recent big drop in lumber prices is a sign of a beginning trend that sees more commodity prices fall. Builder confidence may be down from recent highs, but it is still elevated and this could be the spark to get more builders and more projects started.