Why We’re in a Perpetually Undersupplied Market


Here's some information that I think is super powerful that really no one talks a lot about. But it absolutely will impact you and I as REALTORS.

From 1968 to 2000, the average building in the country was 1.5 million new units. That's a long history there, 1968 to 2000. From 2000 to 2010, that number dropped to about 1.28 million units. Okay. Then we had a big building boom during the run up to the Great Recession. But then it collapsed and builders stopped building at all.

At the end of the day, when you add all those numbers together, what you find, and what analysts have found is that we are not building enough homes by a mile, right? And in fact, in order for us to just meet the supply demands of the country, we need to add 5.5 million housing units to our current inventory out there. And if we don't do that, we're gonna have perpetual low supply, which leads to higher prices and leads to kind of the market that we've just exited.

So in order to hit that level of building, what would need to happen?

What would need to happen is starting right now, in 2022, we would need to start building. For the next 10 years, we would need to build 20-30% more homes than we did in 2021.

Now, do you believe in your local market, that builders are gonna start building 20 to 30% more homes than they did last year at the same time?

If you do not believe that, then you believe that we're gonna have a perpetually undersupplied market, at least in the short term—probably the next 3, 4, 5 years. And if you believe that, what you have to assume is that our current market conditions are not really housing related.

We're kind of getting the effects of, you know, inflation and supply chain issues, and it's rolling into real estate. But once those issues have somewhat resolved for the next couple years, what you're gonna see is a return to normalcy with the market. And maybe a huge run up in the market because we're gonna go right back to our supply demand issues that we already had in this market.

So just something to think about. Something to chew on. Something to understand at a little bit of a deeper level when you're out there talking to people and you just kind of understand this yourself.

Our market is very well positioned. Our housing industry is very well positioned for a continuation of home prices rising, and demand staying very strong because we just have limited supply. And that supply is gonna be a challenge for quite a while longer.

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