Housing Shortage on the Horizon?

by Cristina Callegari Kanellopoulos

It is probably a hard pill for most of you to swallow under the current economic conditions that we are headed towards a housing shortage. But, alas, this is exactly where we are headed.

In order for Developers to keep up with the ever growing U.S. population they must build approximately 1.6 to 1.7 Million new homes per year. This also helps cover the older homes that are demolished, or condemned, in addition to all our "new additions," (cheesy pun definitely intended).

During 2003 to 2006 home building was far exceeding the historical average. So much so that builders created a surplus of 1.3 Million units.

No one noticed the over-production because investors were gobbling them up with easy access to cash, and banks more than willing to lend to anyone. However, once the economy began turning, and all the ready cash was gone - the investors were forced to sell off their excessive inventories due to dropping prices.

So, from 2007-2010 builders/developers began under-producing housing units. As a result today, it is estimated that there are approximately 700,000 empty units above and beyond the normal and necessary levels.

That's a good thing, right?

Well, the answer isn't so simple.

If the economy doesn't begin to improve, and builders continue not to build we will bridge the gap rather quickly and we will begin facing a housing shortage.

This will once again inflate housing prices, and set the U.S. up for yet another housing bubble that will eventually burst.

What we need here is some balance and stability.

How do we achieve that? I'm not sure. But for all you builders and developers out there - I'd like you to know that if you build it - I can certainly sell it!

Have a safe and Happy Memorial Day Weekend!