U.S. now short 4.5M homes as housing deficit grows

https://zillow.mediaroom.com/2024-06-18-The-U-S-is-now-short-4-5-million-homes-as-the-housing-deficit-grows

by myroon5 • 2 years ago

31 68 2 years ago

zillow.mediaroom.com

It certainly doesn't help that political responses to housing (lack of) affordability are commonly demand-side price games (limiting rent increases, subsidizing loans, tax rebates) that feel good but actually cause harm because they worsen the real problem shown here which is that demand growth outpaces supply growth.

oliwarner2• 2 years ago

Or… the market has been enabled to spend more by elaborate and ever-expanding finance products, which in-turn underwrite pensions and other institutional investments, and that has inflated prices.

Would there be as much viable demand at a given price point if you could only get a "salary x4" mortgage like you could 15 years ago? Or x2, 25 years ago? We're x10 now.

Not controlling lending is the biggest economic failure of the past century.

BugsJustFindMe5• 2 years ago

What is "viable" demand supposed to mean? "Homes"/"Housing units" includes rentals. Mortgage salary ratios are irrelevant here. Do the nonviables just get to live on the street and like it? All you need to do is look at total housing units vs total families to see that demand growth naturally outpaces supply growth because we don't build enough to keep up with population increases.

EVa5I7bHFq9mnYK2• 2 years ago

What's up with Raleigh NC? I used to live nearby, that's a nice place and not expensive, why suddenly 30% less housing shortage?

BadHumans3• 2 years ago

North Carolina in general has some of the most sprawl in the nation and hasn't kept up with the demand that tech has brought to the state.

EVa5I7bHFq9mnYK2• 2 years ago

Housing shortage DECREASED 30% from a year ago, not increased. Looks like people leaving in droves. Well, maybe just a statistical fluc.

HDThoreaun3• 2 years ago

Raleigh is one of the fastest building metros in the country

goalonetwo13• 2 years ago

Do we really have a housing deficit? If you look at prices they indeed go up because nobody wants to sell and too many people have been wrongly convinced that buying is always a good idea.

If you look at rent on the other hand it has stabilized in most location. I was even able to negotiate a rent decrease last summer.

I'm not convinced we have a housing deficit. But I'm convinced that too many people are blindly buying at whatever prices, driving the prices irrationally up.

BugsJustFindMe5• 2 years ago

Do we really have a housing deficit?

The number of new families goes up more every year than the number of new places to live. How's your algebra?

If you look at rent on the other hand it has stabilized in most location.

This is false. https://fred.stlouisfed.org/series/CUSR0000SEHA

Zoom in on the 5 and 10 year windows.

goalonetwo13• 2 years ago

Comparatively to the increase in house prices, rents have definitely stabilized. It is now clearly better to rent in most of the US than buy an equivalent house. Use the rent or buy NYT calculator

esalman6• 2 years ago

There's been a 13% rent hike in the similar townhomes to one that I am staying in. I wasn't thinking about buying in this VHCOL area but now I am forced to.

goalonetwo13• 2 years ago

Even with a 13% increase you are probably still better off renting if you are in a VHCOL area. I'm in the bay area and at this point my rent could go up 100% and I would still rent. My rent is 3900$/month. The value of my townhouse is 1.9m$. (Palo Alto area). It would make zero sense to buy even if the rent was 8k$/month

iambateman4• 2 years ago

My first home (bought 2014) is up 100% and my second home (bought 2019) is up 55% over purchase price.

It's unsustainable for this country to think that houses can be both (1) an appreciating investment and (2) affordable.

But in order for us to find long-term price stability, people like me must make peace with the idea of our houses _never_ appreciating beyond inflation.

goalonetwo13• 2 years ago

How much did you "make" on your investment once you account for the ton of fees that are involved in housing though? If your house doesn't go up at least 5% a year, you are already losing money once you account for HOA, insurance, taxes, repairs etc.

I would bet you would have had a better outcome renting and investing in the SP500 instead.

onlyrealcuzzo4• 2 years ago

If you're up 55% in 5 years on 5:1 leverage - that's a 275% return - or an annualized return of 22.5%.

S&P returned ~16% over the same period.

This is pretty consistent for the last ~20 years.

A 6.5% annualized return might not sound like a huge difference - but over 40 years - that's an order of magnitude difference in your outcome.

i.e. the difference in a $100k investment being worth $335M or $37M ($102M vs $11M inflation adjusted).

iambateman4• 2 years ago

Well...the substantial difference is that I could borrow at 3.6% and 2.7% respectively.

On my first home, I put $5,000 down on a $96,000 house. I owe $40k (15-year mortgage) and it's worth $180k. Subtract $20k in seller costs, and $20k in expenses over the past decade and I have $100k in equity.

That is about 6x better than just investing the $5k in the S&P.

aynyc2• 2 years ago

I did this math many many times. I have yet to see SP500 outperform owning a house in my area (I'm in NYC burbs).

gitfan86• 2 years ago

My concern is that the market incentivizes building at the higher end. People who can "only" afford a 4m home will be helped by the home builders who will build plenty of 3m homes but the people who can only afford 400k are getting very few homes built for them.

baggy_trough• 2 years ago

When you move into a 3m home, you generally leave a vacancy in a sub-3m home.

silverquiet3• 2 years ago

Yeah, but if the interest is sub-3% on a mortgage that's like half value of the hose, you can probably rent the sub-3m home at a profit while it appreciates.

silisili4• 2 years ago

Question for anyone who may know from experience: where are all the people coming from? It's a question everyone in my home city keeps asking after seeing all the new developments, and never really investigating an answer I guess.

They keep squishing in apartments and tract housing everywhere there's a postage stamp of land, and it's sold the next day. Even wayyy out in the rural county. My very quiet road was a traffic nightmare by the time I moved on.

The media/government report we're at or below the replacement birth rate, and while immigration exists, the people moving in aren't all exclusively immigrants by appearance. Further, the city reports modest growth on the census.

So, where are all the people coming from? I have to assume it's mostly elsewhere in the city due to census numbers, but no idea from where or how that makes sense.

silverquiet3• 2 years ago

Is your home city not one of the big HCOL cities? If so, I assume it's people fleeing them. I live in San Antonio and hear all the time about people coming here, often without even a job lined up. I was talking to someone in a bar the other week about how she had come in from Hawaii. Her husband had found a job before they moved, but it seems like they were going to move even if he hadn't.

silisili4• 2 years ago

It's a decent sized city in the midwest, and not HCOL.

I thought about that, but the census only reports 6% growth between 2010 and 2020. Unless the census is grossly wrong, which is entirely possible I suppose.

BadHumans3• 2 years ago

While this isn't a complete answer, remote work has let people move away from tech hubs and spread out more to small towns. Idaho has seen rapid increases because of people moving from California and Washington now that they can work remotely. Big money also buys a lot of real estate. Around where I used to live, Berkshire Hathaway bought almost all the houses in the area.

pavon• 2 years ago

While the birth rate is currently below replacement rate, it wasn't 20-30 years ago when the now new homeowners were being born. US birthrate hit a local maximum in 2007, so that will continue to add pressure to housing demand over the next several years. Furthermore, life expectancy grew over the baby boomer population, so people are staying in their houses longer than before. Eventually we will get over this hump as the boomers pass away, and new homeowners decrease due to lower birth rate, but that doesn't help today.

silisili4• 2 years ago

That's a really good point, not sure why I wasn't thinking of that delay. Thanks!

HDThoreaun3• 2 years ago

Household sizes are shrinking, so same number of people want more homes. Plus the population is growing in many parts of the country.

cyberge99• 2 years ago

Yes, but people are dying as well.

xnx• 2 years ago

Older generations are "aging in place" and occupying entire 4 bedroom houses instead of a single apartment or room in their children's' homes.

headcanon2• 2 years ago

I'm looking for a house now and the market is crazy, every house is subject to a bidding war and selling for at least 25% over asking, which sucks for folks who don't have the cash on hand to pay the difference (since the bank only covers so much). There is no way this is sustainable.

I looked into building a house and while its certainly possible its so expensive that everyone is trying to talk me out of it.

Why is it so expensive to build? is it mostly building materials or labor? Is usable land shrinking? Solve that problem and the houses will build themselves.

At the same time the new houses I'm seeing getting built in my area are a demonstration of the phrase "money can't buy taste". We have all this land to build and we choose to continue building badly-designed single family homes, mainly catering to the ultra rich in order to best recoup the building costs. I'm not against single family inherently but we should try more diverse housing options. It would be nice if we could switch it up and change zoning laws to allow mixed housing in new developments: imagine a set of small apartment blocks with retail on the ground floor, surrounded by well-planned single family units that emphasize walkable spaces and community. That would practically be as close to utopia as we could get in this country but nobody seems to have the vision to push that forward.

silisili4• 2 years ago

I can help a little as I went through the same decision a while ago. In the end, I decided to buy a house someone else had built as I don't like tract housing, as it gave me a bit of the best of both worlds - I got a well built custom house, but didn't pay out the nose for it.

There are a lot of factors that play in, certainly labor, but the biggest unique costs I think were the permitting and utility tie ins. When you can bulldoze 10 acres and build 80 houses at once, the cost amortizes way down on everything, including those. When you buy land and want someone to build on it, they have to do all of that work just for your one house.

I personally don't think it's worth it to build a house, unless you already own the land, want something really custom, plan to live there forever, or just have the extra money to spend. The day after it's built, it's not worth the money you spent on it, typically. Of course, over time, that changes.

All of that said, I stepped inside about a dozen 2023 new builds across three builders, and was absolutely mortified by their build quality. Dozens of nail pops, soft spots in floors, misaligned doors, broken rafters, and even a roof truss that wasn't connected to anything on one end.

headcanon2• 2 years ago

Thanks, that was very helpful. I agree, a lot of new construction is really shoddy and put together in a hurry. Naturally I would want to avoid that but you're right, building yourself isn't worth it unless you're ok with waiting for the market to catch up with you, or you're able to build a bunch of houses at once (which a lot of developments do)

pneill2• 2 years ago

Asking why there isn't enough housing is like asking why water is wet. The answer is state/local government regulation.

There's an old saying "your margin is my opportunity" and I suspect that the current crop of homes that are built have decent margins, but in a deregulated market an entrepreneur could come in offer more affordable housing options with lower margins.

You can see this in vehicles. Nobody complains about the vehicle affordability problem because there are far fewer regulations in the transportation industry (don't get me wrong, there are regulations, but not a constraining as you see in the housing market). There's a vehicle at every price point. You got bikes, then ebikes, mopeds, scoters, motorcycles, sub compacts, compacts, full size, trucks, suvs, and all the way to crazy expensive sports cars.

You don't see that in house because affordable housing is not a good business. It's impossible to offer options at the lower end of the market because of zoning laws, environmental impact regulations, a difficult permitting process, nimby's, and affordable housing politicians that are really big proponents of affordable housing except "they have question about this particular housing project."

Here is a terrific video that everyone should watch that shows how insanely difficult it is to make affordable housing. A

https://www.youtube.com/watch?v=ExgxwKnH8y4

Sometimes what you need is less government regulation, not more.

edited sentence "You don't see that in house it's not a good business." to You don't see that in house because affordable housing* is not a good business.

esalman6• 2 years ago

Housing is actually a good business. Otherwise everyone starting from upper middle class families to trillion dollar hedge funds would not clamor to get into it. Also, there might be regulations, but there is also lots of incentives and tax benefits which makes up for it.

pneill2• 2 years ago

Of course it's a good business. Just not at the price points people can afford.

Watch the video I liked to above. It's about a person that owns a laundromat in SF who wants to convert the building to affordable house. He basically wants to do the right thing, but the regulations make it impossible. It was EYE OPENING for me.

HDThoreaun3• 2 years ago

Trillion dollar hedge funds only got into housing recently when they realized NIMBYs would severely limit new construction. Before that speculating on housing didnt make sense.

infotapeworm4• 2 years ago

Not sure why a month old press release is being posted.

This was released today - https://zillow.mediaroom.com/2024-07-16-Nearly-1-in-4-seller...

A buyer's market looms, brethren & sistren

esalman6• 2 years ago

I am shopping for houses and this does not help.

infotapeworm4• 2 years ago

Friendly reminder - Data released by Zillow, Redfin, and the likes is not regulated in any capacity. They choose the narrative that best fits their wallets.

goalonetwo13• 2 years ago

100%. I have been following the housing market for the last few years. So-called data is all over the place. It really feels that all those companies have a narrative in mind and are nitpicking the data to fit the narrative.

I have rarely seen so much narrative-driven BS as in the housing market. The realtors being the absolute best at coming up with a reason why it is always the perfect time to buy or sell.

infotapeworm4• 2 years ago

It's always great until it is not. And when it is not great, it becomes not great on a dime.

esalman6• 2 years ago

Even then, there's absolutely to denying that inventory has gone down and prices has gone up in last few years and it created an affordability crisis for many.

infotapeworm4• 2 years ago

Prices went up because the federal reserve system has been playing very funny games. Old lessons often have to be repeated.

Elastic money will perpetually confuse people, as it takes the discussion out of reality. This is not a simple "supply/demand" problem. It is artificial booms/busts that were instigated by the fed.

Home inventory is up 13% from last April with 1.6 million homes available. Builders are starting to go under water and are trying to flush inventory. 90 day delinquent credit card bills are at a 12-13 year high.

Reality is that the lies keep coming. The most simple and effective propaganda that exists is repetition. The affordability crisis is real, but inventory has not decreased and there is no "shortage"

t-writescode• 2 years ago

Friendly reminder when talking about housing that:

1) in 2022, there were 16M homes just lying empty. https://www.forbes.com/sites/brendarichardson/2022/03/07/16-...

2) Around 5% of Americans own at least a second home (https://www.statista.com/statistics/228894/people-living-in-...) and given a US population of about 340M and, given the very kind presumption that: people *only* own a second home and every group that owns a second home has 2 people in it, that'd be 340M * 2.5% = 8.5M second homes.

3) "Investor Homes", which according to ( https://todayshomeowner.com/blog/guides/are-big-companies-bu... ) tend to be the small houses that people want to buy account for about 22% of purchases *per year*; and they probably aren't selling them, so year over year that takes quite a few properties off the market.

We have *a lot* of spare homes if we incentivized real humans that will live in those properties themselves buying properties and more importantly disincentivized or even punished people and companies from owning second, third or more houses. Yes, many of those houses might be in undesirable places; but among 16M "just lying empty" and 8.5M "second homes", we could probably take a *huge* bite out of "4.5M" homes.

edit: I've edited the text twice now and I can't seem to get italics working, blah.

U.S. now short 4.5M homes as housing deficit grows

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