{"id":11062,"date":"2024-03-15T20:55:51","date_gmt":"2024-03-15T20:55:51","guid":{"rendered":"https:\/\/imsfund.com\/?p=11062"},"modified":"2024-03-15T20:55:51","modified_gmt":"2024-03-15T20:55:51","slug":"the-housing-shortage-will-only-get-worse-heres-what-investors-need-to-know","status":"publish","type":"post","link":"https:\/\/imsfund.com\/index.php\/2024\/03\/15\/the-housing-shortage-will-only-get-worse-heres-what-investors-need-to-know\/","title":{"rendered":"The Housing Shortage Will Only Get Worse\u2014Here\u2019s What Investors Need to Know"},"content":{"rendered":"<p> <br \/>\n<\/p>\n<div id=\"post-content\" :class=\"{ 'hidden': $store.proContent.showFullPrompt() }\">\n<section class=\"px-4 relative border border-slate-200 mobile-toc lg:hidden\" x-data=\"{open:false}\">\n<button x-on:click=\"open = !open\" class=\"flex items-center gap-4 my-2 border-none w-full\"><br \/>\n<svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"h-6 w-6\" fill=\"none\" viewbox=\"0 0 24 24\" stroke=\"currentColor\" stroke-width=\"2\"><path stroke-linecap=\"round\" stroke-linejoin=\"round\" d=\"M4 8h16M4 16h16\"\/><\/svg><\/p>\n<p class=\"font-semibold text-slate-800 text-base m-0 js-toc-ignore\">In this article<\/p>\n<p><\/button><\/p>\n<\/section>\n<p><span data-preserver-spaces=\"true\">There are many reasons property values have ballooned over the last decade: favorable demographics, monetary policy (low interest rates), stimulus, and migration patterns, just to name a few.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">But one of the most powerful and enduring variables that has pushed up pricing over the last decade is a shortage of housing units. Estimates vary on the size of this shortage, but they generally vary from about 1.5 million to 7 million units. And\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.realtor.com\/research\/us-housing-supply-gap-feb-2024\/?utm_source=Realtor.com+Economic+Research+Mailing+List&amp;utm_campaign=677df60051-EMAIL_CAMPAIGN_2020_04_26_01_53_COPY_01&amp;utm_medium=email&amp;utm_term=0_5fdb87a164-677df60051-468514505\" target=\"_blank\" rel=\"nofollow noopener\"><span data-preserver-spaces=\"true\">according to Realtor.com<\/span><\/a><span data-preserver-spaces=\"true\">, the shortage is actually getting worse.\u00a0<\/span><\/p>\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">A Look Back<\/span><\/h2>\n<p><span data-preserver-spaces=\"true\">To truly understand the housing shortage, we need to look back to the lead-up to the great financial crisis and its ensuing fallout.\u00a0<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">As seen in the graph, housing starts (new construction projects begun) accelerated in the housing bubble era of 2000-2007, then promptly fell off a cliff. Housing construction did bottom in 2009, but it took until 2020 for construction levels to return to where they were in the \u201cnormal\u201d 1990s.\u00a0<\/span><\/p>\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"1318\" height=\"450\" src=\"https:\/\/bpimg.biggerpockets.com\/https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/03\/image1-3.jpeg?twic=v1\/cover=1318:450\/max=1000\" alt=\"New Privately-Owned Housing Units Started (1990 - 2024) - St. Louis Federal Reserve\" class=\"wp-image-169388\" title=\"The Housing Shortage Will Only Get Worse\u2014Here\u2019s What Investors Need to Know 2\" srcset=\"https:\/\/bpimg.biggerpockets.com\/https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/03\/image1-3.jpeg?twic=v1\/cover=1318:450\/resize=1318\/max=1000 1318w, https:\/\/bpimg.biggerpockets.com\/https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/03\/image1-3.jpeg?twic=v1\/cover=1318:450\/resize=300\/max=1000 300w, https:\/\/bpimg.biggerpockets.com\/https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/03\/image1-3.jpeg?twic=v1\/cover=1318:450\/resize=1024\/max=1000 1024w, https:\/\/bpimg.biggerpockets.com\/https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/03\/image1-3.jpeg?twic=v1\/cover=1318:450\/resize=768\/max=1000 768w, \" sizes=\"auto, (max-width: 1318px) 100vw, 1318px\"\/><figcaption class=\"wp-element-caption\"><em>New Privately-Owned Housing Units Started (1990 \u2013 2024) \u2013 <a href=\"https:\/\/fred.stlouisfed.org\/\" target=\"_blank\" rel=\"nofollow noreferrer noopener\">St. Louis Federal Reserve<\/a><\/em><\/figcaption><\/figure>\n<p><span data-preserver-spaces=\"true\">There are several reasons why this recovery was so slow, but the primary reason is that many construction companies closed up shop when housing prices crashed\u2014and it takes a while for an industry to recover from such an event.\u00a0<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Of course, construction continued during this recovery, and according to Realtor.com, an estimated 13.4 million units were built from 2012 to 2023. Of those, 9.5 million were single-family homes, and 3.9 million were\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/finding-multifamily-properties\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">multifamily<\/span><\/a><span data-preserver-spaces=\"true\">\u00a0units. Although this may sound like a lot of units, this number needs to be considered in the context of rising demand.\u00a0<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">In the housing market, the best way to measure macro-level demand is through a metric called household formation. A household in this context is any independent person or group of people who live on their own.\u00a0<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">So a family living together is a household. A group of unrelated roommates living together is a household. An individual living alone, also a household. Thus, to understand how demand for housing is changing, we need to see how many new households are formed (or dissolved).\u00a0<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">From 2012 to 2023, 17.2 million households were formed. This means that even though 13.4 million housing units were constructed, there was a deficit of nearly 3.8 million units, according to Realtor.com\u2019s research.<\/span><\/p>\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"1366\" height=\"768\" src=\"https:\/\/bpimg.biggerpockets.com\/https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/03\/image2-2.jpeg?twic=v1\/cover=1366:768\/max=1000\" alt=\"Household Formations vs. Single-Family Home Starts (2012-2023) - Realtor.com\" class=\"wp-image-169389\" title=\"The Housing Shortage Will Only Get Worse\u2014Here\u2019s What Investors Need to Know 3\" srcset=\"https:\/\/bpimg.biggerpockets.com\/https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/03\/image2-2.jpeg?twic=v1\/cover=1366:768\/resize=1366\/max=1000 1366w, https:\/\/bpimg.biggerpockets.com\/https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/03\/image2-2.jpeg?twic=v1\/cover=1366:768\/resize=300\/max=1000 300w, https:\/\/bpimg.biggerpockets.com\/https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/03\/image2-2.jpeg?twic=v1\/cover=1366:768\/resize=1024\/max=1000 1024w, https:\/\/bpimg.biggerpockets.com\/https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/03\/image2-2.jpeg?twic=v1\/cover=1366:768\/resize=768\/max=1000 768w, \" sizes=\"auto, (max-width: 1366px) 100vw, 1366px\"\/><figcaption class=\"wp-element-caption\"><em>Household Formations vs. Single-Family Home Starts (2012-2023) \u2013 <a href=\"https:\/\/www.realtor.com\/\" target=\"_blank\" rel=\"nofollow noreferrer noopener\">Realtor.com<\/a><\/em><\/figcaption><\/figure>\n<p><span data-preserver-spaces=\"true\">If we zoom in to just the last year, we can see that this problem is not improving. In 2023, 1.5 million units were completed, but 1.7 million households formed, growing the deficit by 200,000 units.<\/span><\/p>\n<div class=\"justify-center \" x-data=\"{ IabAdad_block_: popAd(['r720x90'], '1') }\" :class=\"IabAdad_block_.linkURL ? 'flex pt-8' : 'hidden'\">\n<a x-show=\"https:\/\/www.biggerpockets.com\/blog\/IabAdad_block_.linkURL\" x-on:click=\"adClicked('https:\/\/www.biggerpockets.com\/blog\/the-housing-shortage-will-get-worse-in-2024', IabAdad_block_.sponsor, IabAdad_block_.title, IabAdad_block_.id, 'blockAdClicked', 'blockAd', 'postContent')\" target=\"_blank\" x-init=\"&#10;      analytics.track('blockAdLoaded', {&#10;        referrer: 'https:\/\/www.biggerpockets.com\/blog\/the-housing-shortage-will-get-worse-in-2024',&#10;        sponsor: IabAdad_block_.sponsor,&#10;        ad_title: IabAdad_block_.title,&#10;        ad_page_location: 'postContent'&#10;      })&#10;    \" x-intersect:enter.once=\"adViewed('https:\/\/www.biggerpockets.com\/blog\/the-housing-shortage-will-get-worse-in-2024', IabAdad_block_.sponsor, IabAdad_block_.title, IabAdad_block_.id, 'blockAdViewed', 'blockAd', 'postContent')\" rel=\"noopener\"><\/p>\n<div class=\" hidden sm:block\">\n<img class=\"m-0\" :src=\"https:\/\/www.biggerpockets.com\/blog\/IabAdad_block_.r720x90\" :alt=\"IabAdad_block_.r720x90Alt\"\/>\n<\/div>\n<div class=\"block sm:hidden\">\n<img class=\"m-0\" :src=\"https:\/\/www.biggerpockets.com\/blog\/IabAdad_block_.r320x50\" :alt=\"IabAdad_block_.r320x50Alt\"\/>\n<\/div>\n<p><\/a>\n<\/div>\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Implications of the Trend\u00a0<\/span><\/h2>\n<p><span data-preserver-spaces=\"true\">This has big implications for investors and the broader housing market: A housing shortage will provide sustained upward pressure on\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/on-the-market-163\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">housing prices<\/span><\/a><span data-preserver-spaces=\"true\">. To me, this seems clear, but I want to offer two caveats.\u00a0\u00a0<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">First, as mentioned, there are many variables that impact the housing market, and the supply of homes is only one of them. I believe supply-side forces will help support housing prices for years (decades?) to come\u2014but that doesn\u2019t mean housing prices cannot fall, nor does it mean they will grow rapidly. There are other forces in the housing market, like\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/on-the-market-145\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">affordability<\/span><\/a><span data-preserver-spaces=\"true\">\u00a0or the labor market, that could provide downward pressure and counteract the impact of low supply.\u00a0<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Secondly, as with all real estate, the impact of this trend will be regional. Some markets will have sufficient supply or even an excess, but most will not. According to Realtor, 73 of the top 100 markets face a deficit, with some high-growth markets in Texas and Florida facing the largest shortage.<\/span><\/p>\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"1728\" height=\"1384\" src=\"https:\/\/bpimg.biggerpockets.com\/https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/03\/image3-2.jpeg?twic=v1\/cover=1728:1384\/max=1000\" alt=\"image3 2\" class=\"wp-image-169390\" title=\"The Housing Shortage Will Only Get Worse\u2014Here\u2019s What Investors Need to Know 4\" srcset=\"https:\/\/bpimg.biggerpockets.com\/https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/03\/image3-2.jpeg?twic=v1\/cover=1728:1384\/resize=1728\/max=1000 1728w, https:\/\/bpimg.biggerpockets.com\/https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/03\/image3-2.jpeg?twic=v1\/cover=1728:1384\/resize=300\/max=1000 300w, https:\/\/bpimg.biggerpockets.com\/https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/03\/image3-2.jpeg?twic=v1\/cover=1728:1384\/resize=1024\/max=1000 1024w, https:\/\/bpimg.biggerpockets.com\/https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/03\/image3-2.jpeg?twic=v1\/cover=1728:1384\/resize=768\/max=1000 768w, https:\/\/bpimg.biggerpockets.com\/https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/03\/image3-2.jpeg?twic=v1\/cover=1728:1384\/resize=1536\/max=1000 1536w, \" sizes=\"auto, (max-width: 1728px) 100vw, 1728px\"\/><\/figure>\n<p><span data-preserver-spaces=\"true\">So just remember that this trend won\u2019t be felt equally everywhere. For investors, I recommend that you research the relationship between housing construction and household formation in any market that you\u2019re investing in. Understanding supply dynamics is super important.<\/span><\/p>\n<p><span data-preserver-spaces=\"true\">Once you\u2019ve done that\u00a0<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/real-estate-investment-analysis\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">analysis<\/span><\/a><span data-preserver-spaces=\"true\">, let me know what you find in the comments below.<\/span><\/p>\n<div class=\"wp-block-group has-slate-200-background-color has-background is-layout-constrained wp-block-group-is-layout-constrained\">\n<div class=\"wp-block-group__inner-container\">\n<div class=\"wp-block-group__inner-container\">\n<h2 class=\"wp-block-heading has-text-align-center has-theme-slate-dark-color has-text-color\">Make Easier and Smarter Financing Decisions<\/h2>\n<div class=\"wp-block-media-text has-media-on-the-right is-stacked-on-mobile is-vertically-aligned-center\" style=\"grid-template-columns:auto 34%\">\n<div class=\"wp-block-media-text__content\">\n<p>Deciding how to finance a property is one of the biggest pain points for real estate investors like you. The wrong decision may ruin your deal.<\/p>\n<p>Download our\u00a0<strong>What Mortgage is Best for Me\u00a0<\/strong>worksheet to learn how different mortgage rates impact your deal and discover which loan products make the most sense for your unique position.<\/p>\n<\/div>\n<figure class=\"wp-block-media-text__media\"><img loading=\"lazy\" decoding=\"async\" width=\"1000\" height=\"1000\" src=\"https:\/\/bpimg.biggerpockets.com\/https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/02\/MI-March24_Blog-Thumbnail_v2.png?twic=v1\/cover=1000:1000\/max=1000\" alt=\"what mortgage is best for me\" class=\"wp-image-168724 size-full\" title=\"The Housing Shortage Will Only Get Worse\u2014Here\u2019s What Investors Need to Know 5\" srcset=\"https:\/\/bpimg.biggerpockets.com\/https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/02\/MI-March24_Blog-Thumbnail_v2.png?twic=v1\/cover=1000:1000\/resize=1000\/max=1000 1000w, https:\/\/bpimg.biggerpockets.com\/https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/02\/MI-March24_Blog-Thumbnail_v2.png?twic=v1\/cover=1000:1000\/resize=300\/max=1000 300w, https:\/\/bpimg.biggerpockets.com\/https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/02\/MI-March24_Blog-Thumbnail_v2.png?twic=v1\/cover=1000:1000\/resize=150\/max=1000 150w, https:\/\/bpimg.biggerpockets.com\/https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/02\/MI-March24_Blog-Thumbnail_v2.png?twic=v1\/cover=1000:1000\/resize=768\/max=1000 768w, https:\/\/bpimg.biggerpockets.com\/https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/02\/MI-March24_Blog-Thumbnail_v2.png?twic=v1\/cover=1000:1000\/resize=200\/max=1000 200w, \" sizes=\"auto, (max-width: 1000px) 100vw, 1000px\"\/><\/figure>\n<\/div>\n<\/div>\n<\/div>\n<p class=\"italic\"><b>Note By BiggerPockets:<\/b> These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.<\/p>\n<\/div>\n<\/div>\n<p><br \/>\n<br \/><a href=\"https:\/\/www.biggerpockets.com\/blog\/the-housing-shortage-will-get-worse-in-2024\">Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In this article There are many reasons property values have ballooned over the last decade: favorable demographics, monetary policy (low interest rates), stimulus, and migration patterns, just to name a few. But one of the most powerful and enduring variables that has pushed up pricing over the last decade is a shortage of housing units. [&hellip;]<\/p>\n","protected":false},"author":5,"featured_media":11063,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"fifu_image_url":"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/03\/housingshortage-1024x517.jpg","fifu_image_alt":"","footnotes":""},"categories":[9],"tags":[],"class_list":["post-11062","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog"],"_links":{"self":[{"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/posts\/11062","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/comments?post=11062"}],"version-history":[{"count":1,"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/posts\/11062\/revisions"}],"predecessor-version":[{"id":11064,"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/posts\/11062\/revisions\/11064"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/media\/11063"}],"wp:attachment":[{"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/media?parent=11062"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/categories?post=11062"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/imsfund.com\/index.php\/wp-json\/wp\/v2\/tags?post=11062"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}