Is a housing shortage coming? If you watch TV news or read newspapers, you would say, “Absolutely not!” Yet a few economists are beginning to predict a housing shortage in just a few years. Why? Here’s the story:
According to the U.S. Department of Commerce, our country forms something north of one million new households each year. In other words, every year we need to add another one million-plus housing units – apartments, condos, single-family homes. During the height of the housing boom, the country was building more new homes than households being formed. (Small wonder there was a housing glut!) But, now, we are building far fewer. Recent housing statistics show that the country is adding around 500,000 units per year, less than half of what is needed. And, this number does not take into account the obsolete housing units that are torn down annually.
Once the country burns through the excess inventory built in the 2005-2008 era, the supply of housing being produced will not begin to meet the demand. Because so many building material suppliers and construction companies have either cut back or disappeared, it will be difficult to construct the number of units needed. Thus, some economists are beginning to predict not only a housing shortage, but an accompanying increase in housing prices.
Not many people have the courage to buy in a down market. But, historically, smart investors run against the herd. They sell when everyone else is buying and buy when everyone else is selling. With interest rates at record lows and housing prices down from their lofty heights, now might be the best time in a lifetime to buy real estate.