Economist: Housing shortage coming in 2011

[rudder]

He fails to point out that not everyone can own property. You're going to see more people with roomates renting a place out because they can't afford it.

Sure they can... balloon mortgages, 80/20 loans, interest only ARM's. Plenty of ways. Lenders would just have to get a little creative. As long as Fannie Mae and Freddie Mac are there to get into this market... it will be federally insured. What could go wrong?

 

[RyanPaulShaffer]

The premise of the article seems absurd to me. People are still losing jobs left and right, foreclosures are still sky-high, housing sales are still in the dumps, and yet they are predicting "housing shortages" starting next year?

Bullocks.

 

[ElFenix]

http://finance.yahoo.com/news/New-home-sales-hit-record-low-apf-2245141272.html?x=0&.v=1

New housing starts in January were the lowest on record.

january weather was also crappier than usual for much of the country, and weather surely plays a part in housing starts (hence seasonal adjustments)

 

[BoberFett]

The only "housing shortage" we'll see in the near future will be at the low end, given employment and income trends. That's if there's any shortage at all.

Agreed. Most major cities have row upon row of empty townhomes right now. The problem is affordability, not physical structures.

Also (without trying making it political because both parties did it) any attempts to shore up home values to protect current owners who purchased at the height of the pricing insanity are only exacerbating the problem. We're doing our best to keep home prices high while at the same time encourage people to buy who can't afford it anyway. It's madness.

 

[JeffreyLebowski]

Agreed. Most major cities have row upon row of empty townhomes right now. The problem is affordability, not physical structures.

Also (without trying making it political because both parties did it) any attempts to shore up home values to protect current owners who purchased at the height of the pricing insanity are only exacerbating the problem. We're doing our best to keep home prices high while at the same time encourage people to buy who can't afford it anyway. It's madness.

But this is America, not Sparta!!!!!!!

 

[Slew Foot]

Also (without trying making it political because both parties did it) any attempts to shore up home values to protect current owners who purchased at the height of the pricing insanity are only exacerbating the problem. We're doing our best to keep home prices high while at the same time encourage people to buy who can't afford it anyway. It's madness.

Completely agree, Freddie just said today theve got a record # of mortgages that are behind in payment. More of my taxes down the drain.

 

[Fern]

...and then if you throw in, you know, stratospheric unemployment rates and the number of additional people who will foreclose their house in the future, we need about 0 additional houses.

LOL, that's what I'm thinking.

Fern

 

[StageLeft]

But this is America, not Sparta!!!!!!!

 

[werepossum]

january weather was also crappier than usual for much of the country, and weather surely plays a part in housing starts (hence seasonal adjustments)

Good point.

 

[ebaycj]

The economist has a valid point (we need to keep building some homes); but it is overstated and premature and therefore blatantly wrong.

America is growing by about 2.7M people per year. 67.2% of Americans live in houses. Thus, if houses only held one person, we'd need 1.8M new houses a year (plus a bit for houses which are destroyed). But, that is about as far as he got the data correct. What about the fact that houses hold more than one person? If an average of 2 people moved into each house, that number of needed homes plummets to ~0.9M.

Also, he forgot about the massive increase in vacant homes. Typically there were about 2M vacant homes. That number now stands at 3.5M. That 1.5M additional vacant homes will satisfy the ~0.9M/year demand for 20 months (basically the end of 2011 if not a single home was built in that time).

Finally, he forgot that home-ownership rates have fallen for 5 straight years. This started happening even before the bubble burst. As people move out of their homes and back into apartments, there are more vacant homes available for this need. At the current rate of 0.4% per year, 0.4%*130M homes = 0.5M homes available per year just from people moving to apartments. That alone meets more than half of the 0.9M home need. The current new home construction rate of 0.59M/year fills the rest of the need.

Yes, there may be local shortages, but unless trends change, we are building just enough homes to meet the demand from new Americans.

Like I said

 

[Ozoned]

The only "housing shortage" we'll see in the near future will be at the low end, given employment and income trends. That's if there's any shortage at all.

I'll agree with soccerballtux for a change when he says that banks are holding inventory off the market- that's what they did during the S&L crisis, and obviously what they're doing today.

Even here in Denver, where the real estate bubble never really got off the ground and the effects of the current recession are muted, the number of empty homes in some of the suburban developments is quite large... Entire subdivisions in some of the most bubblicious markets are basically empty... Nice, big new houses that nobody can afford to buy...

I bought a townhouse in the Eagle Ridge subdivision. It is pretty much full. I'd like to move there, but will probably sell it when the market comes back. In the mean time, my daughter has a cheap place to live while she goes to school. We bought it on a short sale offer to the seller for about .35 cents on the dollar. His bank took it.

 

[dullard]

january weather was also crappier than usual for much of the country, and weather surely plays a part in housing starts (hence seasonal adjustments)

#1: Werepossum was incorrect with his post summary. New housing SALES were lowest, new home starts are actually up a bit. That makes the economist's view even more wrong. If new home SALES are at record lows, how on Earth could we need to be building drastically more new homes?

#2: Like you said, that data is already seasonally adjusted. Thus the January lows aren't that much lower. New home starts have been basically unchanged for 13 straight months New home sales have fluctuated a bit, but they too have been fairly constant for 15 straight months.

 

[StageLeft]

btw I read today that housing values nationally is set to drop (some link on cnn) by 6% in the next two years and 30% still in miami, I think.

 

[Jhhnn]

Part of what's happening, Ozoned, is that people forced out of their single family suburban dwelling are now renting investor owned townhomes. It's not like they're deadbeats, just more like they got caught when the market and valuations collapsed, and their ARM reset or recast. Add unemployment to the picture, as well. Many could afford to buy the townhome, except that their credit is shot from the default on their previous residence...

As I offered earlier, if there'll be any shortage, it'll be at the more affordable end of housing.

It's part and parcel of the Hi-Lo split that's tearing America apart, as well.

The housing market traditionally depends on homeowners being able to trade up, as well, use their equity to do so while maintaining reasonable payments. That can't happen for homeloaners who are underwater, which we'll see even more of in coming years, because housing prices are still way high in many areas, destined to fall even further... jobless recoveries being what they are...

Some of my neighbors are essentially in lockdown with negative equity. They need or want a larger home because of growing families, but they can't break even on their current dwelling for that to happen, and they certainly don't have the cash to cover the difference, tens of thousands or more... Some saved for nearly a decade to have the downpayment a few years ago- now that's wiped out, and a lot more...

 

[CPA]

Seriously, if you look at other countries, the "kids" move out at 30. Its called being frugal.

Give me a break. My kids are out at 18 and they know. I don't give a crap what they do in other countries.

 

[mattpegher]

I don't see his point, other than to predict a future supply/demand effect on pricing. If the demand goes up, and the supply is low then more contractors will start building homes. It's not like it takes more than a few months to build a home. Sure the market adjustment may make the cost of owning a home more, and some may not be able to afford it, esp with lower income families. It just doesn't seem to me to be something that the free-market system wouldn't adjust for. The bubbles and busts of the housing market are mostly due to financial influences, not supply and demand.

 

[StageLeft]

Give me a break. My kids are out at 18 and they know. I don't give a crap what they do in other countries.

If you live in poverty or in a city like Rome where a two bedroom apartment costs $800k it's not surprising young people hang around for a while longer sleeping on the couch. Thankfully we don't have to put up with it.

 

[Ozoned]

Part of what's happening, Ozoned, is that people forced out of their single family suburban dwelling are now renting investor owned townhomes. It's not like they're deadbeats, just more like they got caught when the market and valuations collapsed, and their ARM reset or recast. Add unemployment to the picture, as well. Many could afford to buy the townhome, except that their credit is shot from the default on their previous residence...

As I offered earlier, if there'll be any shortage, it'll be at the more affordable end of housing.
...

If I didn't live 250 miles away, I think I might buy more. I heard that some of the subdivision houses on tower road out by the airport are being turned over by the banks for 1/2 of what it costs to build. Probably could lease them back to the people that live in them now...

 

[HumblePie]

If you live in poverty or in a city like Rome where a two bedroom apartment costs $800k it's not surprising young people hang around for a while longer sleeping on the couch. Thankfully we don't have to put up with it.

I personally couldn't wait to get out of the house when I turned 18! I wasn't looking to buy a home at the time, or stupid enough to try though.

 

[Slew Foot]

If you live in poverty or in a city like Rome where a two bedroom apartment costs $800k it's not surprising young people hang around for a while longer sleeping on the couch. Thankfully we don't have to put up with it.

Sounds like the CA Bay area if you ask me.

 

[thegimp03]

With all the people out of work right now, I doubt they are saving up to buy a place in the next year or two. Here in the Bay Area, good luck finding a 2br condo that's not in a bad area or a shithole for less than $450K. And to afford the mortgage on that I hope you're making over $75K/yr at the low-end unless you get some help from family for a huge downpayment.

 

[theeedude]

Maybe ghetto slum housing shortage is coming.

 

[Slew Foot]

With all the people out of work right now, I doubt they are saving up to buy a place in the next year or two. Here in the Bay Area, good luck finding a 2br condo that's not in a bad area or a shithole for less than $450K. And to afford the mortgage on that I hope you're making over $75K/yr at the low-end unless you get some help from family for a huge downpayment.

The funny part is that in the area im looking, int he last month 18 out of the 22 houses that were for sale sold. And theyre all in the 1.1-1.5 mill range, who the fuck bought them all up?

 

[Ozoned]

The funny part is that in the area im looking, int he last month 18 out of the 22 houses that were for sale sold. And theyre all in the 1.1-1.5 mill range, who the fuck bought them all up?

Somebody with cash that convinced the people that were holding the paper that 20 cents on the $ is a good deal.

 

[WhipperSnapper]

Some people might shrug these statistics off considering the number of foreclosures in the market. To them, Wesbury told Steve Forbes, "Yes there's foreclosures coming into the market, but we're only starting right now ... We're starting one-third of the houses we need just to keep up with population growth, and that can't last.

He's right--if you ignore other economic factors, on paper the U.S. would need more housing. However, because the United States is transforming into a third world nation and is losing jobs (forget about creating enough new jobs, including solid middle class jobs, to keep up with population growth), no one will be able to afford to purchase those houses. Right now people are moving in with their parents, not moving out and purchasing their own houses.