Shortage of Homes on the Horizon

The housing market is changing. Those are words that many homeowners have been waiting to hear for a long time now. Based on predictions by economists, we could find ourselves with a shortage of housing before too long.

This may seem hard to believe, as we have grown accustomed to hearing of home values dropping and properties staying on the market for a long time. Plus the last few years have brought an onslaught of news about the large number of foreclosures and of my neighbors being in default on their San Diego Mortgage.

The reason that a housing shortage lingers in the near future is that the companies who build homes have significantly declined their production over the course of the last few years. You can hardly blame them. When property values were quickly falling, very few buyers were in the market. And many builders found themselves in situations where their projects, which once made sense on paper, would no longer pencil out.

According to the National Association of Realtors, somewhere between 1.6 and 1.7 million homes need to be added to the supply in order to keep up with our increases in population and replace homes which have been destroyed. In the years of the big real estate boom (2003-2006), the builders were pumping out homes in an amount which greatly exceeded the historically-based average. At first that surplus was not apparent, because there was so much investor money pouring into the market and buying everything up. But then the market turned, the investor dollars went away, and many of those properties came right back on the market.

If builders keep under producing based on the historical average, we could very easily face a housing shortage. While there is still over a half-million vacant homes above the norm, this number could shrink rapidly as we see the economy recover and the market get re-invigorated.