The financial media, as well as realtors across America, will probably disagree. They claim that the record increase in home prices is due to a chronic shortage of housing in the U.S. They argue that this shortage is what is ultimately causing prices to spike and inventories to stay low.
Permitting and construction of new homes collapsed from 2.2 million in 2005 all the way down 600k by 2011 after the last housing crash. It then took another five years for developers and builders to get back to normal levels of home construction.
This decline would seem to support the “Housing Shortage” argument. However, this decline in building has been matched by a decline in population growth.
Due to America’s aging population, there are considerably fewer births and more deaths in 2020-21 than 5, 10, or 20 years ago. The resulting lower rates of population growth mean that demand for housing is lower on a relative basis now than before the last crash.
In fact, 2020 was the first year in U.S. history when permitting for new homes and apartments (1.5 million) exceeded population growth (1.2 million). Even during the mid-2000s, when the US was building more new housing than ever before, population growth always managed to exceed permitting.
But no longer. Declining natural increase in population, along with declining immigration, has resulted in a huge drop off in fundamental demand for housing in the United States.
This can be seen across local markets. Cities like Austin, Nashville, Salt Lake City, Boise, and Raleigh are producing lower rates of population growth relative to building in 2020 than in the mid-2000s.
On the contrary – markets like Miami, Tampa, San Francisco, and Columbus – are actually experiencing real housing shortages, permitting fewer new homes and apartments now compared to the mid-2000s.
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0:00 Housing Shortage MYTH
3:00 Home Prices at RECORD Highs!
4:45 2008-12 Home Building Decline
8:10 Equilibrium Level of Homes
9:48 Declining Births, Increasing Deaths
12:10 MAJOR ISSUES for Housing Market
14:58 Immigration has also Tanked
17:46 1.2 Million is Not Enough!
19:41 Population Growth / Permit Ratio
21:37 Austin = Not All It’s Cracked up to Be
24:06 Salt Lake & Nashville Over Building?
26:45 Markets with an Actual Shortage
29:05 Avoid These Markets?
31:19 You Need to Use Data!
#HousingBubble #Housing Shortage #RealEstateCrash