Housing prices are skyrocketing. The basic principles of market economy apply: if people want to buy houses and there is insufficient supply to meet demand, prices will rise. We have seen this exact scenario in Sun City Carolina Lakes this year. Inventory has been extremely low. With buyers waiting in the wings for homes to become available, prices have risen to reflect demand. Across the US, the phenomenon is the same. The question is, why are there so few homes available?
Your first instinct might be to blame the pandemic. We know some people chose to delay moves during and after quarantine. Add to this scenario Covid related supply shortages, shipping delays and rising material costs. These have certainly all played a part in the housing supply shortage.
However, NPR recently published an article sharing some more specific ideas on why housing prices have been rising in the U.S. The short answer? There are not enough people who know how to build houses.
According to an economist at the Brookings Institution, the housing shortage supply can be traced back to the 2008 housing bubble. There was a glut of homes on the market then. With so many homes available, they were losing value. So, it did not make sense to continue building more. The construction industry slowed from building approximately 2 million homes to closer to 600,000 homes annually in the U.S.. Today we are experiencing a housing shortage. According to an analysis by Freddie Mac, there are 3.8 million fewer homes than we need in the U.S. to meet demand.
The solution sounds easy…build more homes to meet housing demand. However, it isn’t quite that simple. When construction slowed after 2008, fewer people looked for jobs in the construction industry. Over the past few decades, there has actually been a push for college students to pursue white collar jobs. Hence, 13 years later, the U.S. has less skilled labor with the knowledge to build homes. Fortunately, since the pandemic contractors are in high demand which may result in more people training for skilled labor positions in the construction industry. And, some cities are starting initiatives such as offering free community college for students pursuing education in trades. But, these initiatives will take time.
Maybe we should call the housing crisis a trade crisis instead!
To learn more about our local real estate market, give Team Pogue a call today at 803-504-1111.