In some growing cities across America, housing shortages are already here and there is a prediction this might become a national trend if the economy continues to improve. Dallas, Austin, coastal California, Pendleton, Ore., Greater New York City, certain Washington, DC suburbs and dozens of college towns show low inventories and rising demand that is not being met by new construction.
With healthy inventories, 3 million foreclosures, more and more short sales, falling values, rising vacancy rates, shrinking rents and one third of all homeowners underwater, could we possibly be heading for a national housing shortage this year?
Wesbury figures America needs to add 1.5 million housing units per year just to keep up with population growth plus another 100,000 for fires and tear-downs, et al, we need 1.6 million or more per year. Right now we're down to about six and a half, seven months' inventory, whether you look at new homes or existing homes. Housing starts are now between 500,000 and 600,000 a year.
"During the last decade, net new household formation averaged approximately 1.4 million per year. Last year, the Census reported that the US added only 544,000 new households – during severe contractions the young stay at home, singles "double up", and household formation (normally) slows. Even with declining demographics, however, most analysts foresee new household growth resuming to a level of at least 1 million by 2010 and beyond. If we conservatively add 200,000 demolitions per year, the US economy will "need" at least 1.25 million new units yearly in the near future. With today's currently depressed construction, this generates a yearly deficit of 750,000 units. At that rate, the current excess inventory of units for sale or rent will be back below normal by 2011. Prices historically have a strong relationship with sales "duration" – the ratio of inventory-to-sales. Hence under reasonable conditions, in two years we will have to increase construction considerably and prices will have to justify the cost of that construction," Wheaton wrote.
Home building across the country is almost non-existent compared to a few years ago. In 2005, 2 million housing units were built in this country. Last year, that number dropped to nearly a quarter of that. Home builders have lost half their share of the U.S. housing market in the past two years, largely because of competition from cheap foreclosed houses. In 2009 only 7.6 percent of the homes sold were newly constructed, down from the average of about 16 percent over the previous two decades, according to the Wall Street Journal. From June 2007 to June 2008, residential construction lost nearly 115,000 jobs, according to the Bureau of Labor Statistics.
Housing Shortage Predicted in 2010
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