Ive heard repeatedly when trying to learn about our housing situation that we don’t have enough homes. I don’t understand how that’s the case or if it’s even true. Who or what is stopping more homes from being built exactly? If the demand is so high and the supply is so low then the suppliers would obviously ramp up production, right?
In: Economics
>If the demand is so high and the supply is so low then the suppliers would obviously ramp up production, right?
Demand/home prices is only one factor that motivates whether a builder can build. Most builders–whether they’re building single-family homes or high-rise apartments–have to acquire a substantial tract of land first. That is a huge capital expense that comes with a lot of ancillary costs and work. Your labor material, and insurance costs also can’t be so high they devour the margin. And you’re going to need several tranches of financing and sureties, the terms of which are generally subject to macro conditions that builders and developers can’t control. You need all these things to line up before you pull the trigger on building a 50+ home development or a block of condos. And of course the project isn’t going to be complete for years.
Latest Answers