This is not about a gas shortage or food shortage. This is about a housing
shortage. Ten years ago when I was showing houses to new arrivals, I
told them they would not have trouble finding what they wanted but
would have trouble choosing from the gracious selection being offered. I
really miss those days. Now it is not only hard to find what they want but
they usually have to bid against others to get it. We have described over
the last few years all of the reasons for the current housing shortage. It
all started with the bursting of the housing bubble. After that folks could
not sell their house because financing options dried up. Others did not want
to sell because their value was too low due to the nearly 30% drop in prices.
A third major reason was no confidence in job security. These
and other reasons sparked a cycle of tying up a lot of houses with long
term leases. As this problem has slowly resolved itself, those few houses
that were left on the market have been gobbled up almost as soon as
they appear for sale. As a company, Craver Real Estate is eagerly
wanting new listings since in this active market we have just about sold
everything in the inventory.
Let’s focus on the new construction shortage. The Wall Street Journal
recently had an interesting article where they quoted the National
Home Builders Assoc. The NHBA knows their industry just like National
Assoc. of Realtors knows the brokerage market. NHBA blames lender
restraints and regulations on the shortage of new homes being produced.
Home ownership is at a 50 year low, down from 69% a decade
ago to just 63.7% now. To realize how significant this is, if the home
building side of the housing market had produced at their normal rate
last year it would have added over $300 billion to the U S economy.
That would have increase our GDP by 1.8%. That doesn’t sound like
much unless you understand that our annual GDP has not reached 3%
in eight years.
Personally I blame the Dodd-Frank bill that was passed as a title only
and then written over the last number of years. No one wants to go
back to the “loan to anybody” days just before the housing crisis, but, as
usual, the government swung the pendulum too far in the other direction.
In normal conditions 12% of mortgages are at risk of default. Last
year that dropped to 5.1% meaning that lenders, due in large part to
restrictions built into Dodd-Frank, were not making loans to thousands
of people who pose very little risk. The article says that these folks have
been kept away from riding the recent growth in housing prices, forcing
them to rent instead of buy.