I’m new to this sub. Why is there a housing shortage when the birth rate has been declining considerably? The national news just said we need 5 million more homes to satisfy the current need. I’m genuinely curious. Thanks!
In: Economics
There are several different reasons.
1. The 2008 crash is still fresh on home builders minds so they build very cautiously. This constrains new supply and prices rise
2. Cities pass laws saying houses and apartments can only be built in certain areas and only to a certain height. All the land available for building houses on is already built out. Since there is no land to build new houses, supply is constrained and prices rise
3. Covid caused people to want more space driving demand in certain areas. Covid also caused people to not sell since if you owned a house you wanted to limit risk during an economic crisis. This increased demand and decreased supply which caused prices to rise.
4. Interest rates are much higher so people who may have been looking to sell and get a bigger place aren’t because they have such a low interest rate on their current home they can’t get a bigger house for the same monthly payment after rolling their equity to a larger down payment. This has constrained supply causing prices to rise.
Then you have other factors increasing demand to buy.
Air BnB (and other short term rentals) in some areas have increased demand. More demand same supply, higher prices.
Corporate landlords are looking for new properties they can rent. More demand, higher prices.
Real estate is seen as a solid investment and generally it’s been true but there have been down turns. Foreign investors who have nothing better to do with their money like the “safety” of owing property and buy houses (sometimes to rent) increasing demand.
Any one of these may not be bad but when you pile all of them on, it leads to high demand, high prices, and the income level needed to qualify for a house keeps rising faster than average wages.
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