Economist: Housing shortage coming in 2011
He says that if new houses aren't built soon in the U.S., there won't be enough next year.
The focus of the U.S. real-estate market lately has been the number of foreclosures and people trying to purchase cheap housing. But Brian Wesbury, chief economist at First Trust Advisors, says that if Americans don’t start focusing on building new houses, the market will have a much bigger problem on its hands.
“We need one and a half million houses per year just to keep up with population growth,” Wesbury said in an interview with Steve Forbes. “And then if you throw in, you know, fires and tear-downs and just worn-out properties, we need 1.6 million or more per year. Right now, we’re down to about six and a half, seven months’ inventory whether you look at new homes or existing homes.”
Privately owned housing starts in December 2009 were at a seasonally adjusted annual rate of 557,000, according to the U.S. Census Bureau and the Department of Housing and Urban Development. This is 4% less than where it was in November, which had 580,000 housing starts.
Housing completion numbers also contribute to this dire picture, with privately owned housing completions reaching a seasonally adjusted annualized rate of 768,000 in December 2009. That was down 11.2% from the 865,000 completions in November and down 25.3% from the 1.03 million completions in December 2008.
- MSN Money: Find a mortgage under 5%
Some people might shrug these statistics off, considering the number of foreclosures on the market. “Yes there’s foreclosures coming into the market, but we’re only starting right now,” Wesbury says. “... We’re starting one-third of the houses we need just to keep up with population growth, and that can’t last.”
- On our blog, 'Listed': Rent is cheap now, but a shortage looms
There were 315,716 properties last month with foreclosure filings, according to RealtyTrac. These filings include default notices, scheduled auctions and bank repossessions. Though last month’s filings were 15% more than a year ago, they were 10% less than in December.
Jason Thomas, chief investment officer for Aspiriant, a California wealth-management firm, says he doesn’t see the foreclosure situation getting better until the labor market picks up. “So many people are getting to a point where they just can’t hold on anymore, and we may see another wave of that if we don’t see a pretty robust turnaround in the labor market,” he says.
The unemployment rate is currently 9.7%, down from 10% at the end of 2009, according to the Bureau of Labor Statistics.
Thesis Fund Management portfolio manager Stephen Roseman says the likelihood of a housing shortage is slim to none. “You need to have an accurate housing turnover number, and right now we have anything but that,” he says.
There is some demand, though, from companies that are scooping up whole floors or housing developments because they have the cash on hand, Roseman says.
And for those people who can get a mortgage, homes are very affordable. The median price for U.S. existing single-family homes in metropolitan areas was $173,200 in 2009, according to the National Association of Realtors, compared with $198,100 in 2008.
Mortgage rates are also very low. For instance, both JPMorgan Chase and Wells Fargo are offering 30-year fixed mortgages at 5%, and some can be found for a hair less.
“A mortgage is not difficult to get if you have the right income stream,” says Margaret Starner, senior vice president for the financial services firm Raymond James.
But even if you can get a mortgage, maintaining the income to pay for that mortgage isn’t easy. “There’s a lot of potential problems that can come out if unemployment continues to drag; people deplete their savings and their credit card,” says Michael Ervolini, head of behavioral finance at Cabot Research. “It appears to be more of an income issue than a housing issue that we’re going to be looking at for the next couple of years.”
Need help and do not know who to contact. I won a parcel next to a forclosed home. When the forclosed home was cleaned out by realestate office by people they hired. They went onto my property next door and cleaned me out also to the tune of $9800.00. The This had been over a week ago and the people know they have done wrong, all my stuff was thrown away in the dump I am told. The Realestate office is dragging their feet to compensate me for my loss. Who do I contact as I have been told it is a civil matter and not a criminal matter; even though they cut the lock on my gate and made a key to enter my shed and stole over 9K worth of stuff.
email me with any help
I am a Realtor in the Tampa Bay, an area of the country probably more ravaged by unemployement and fallen real estate prices in the country, second to only Las Vegas and there is some notion of truth to this article... At least in my area, despite public opinion that one can move here right now into 3,000 sqft 5 bedroom home with a pool in a good neighborhood for 100-$150,000 is OUT OF THEIR MIND!!! Like Realtors and other Real Estate professionals understand, you can not really count properties that are in a short sale status as "real inventory" because IT'S NOT REALLY AVAILABLE!!!!! It's almost like a teaser to start a bid process that usually ends up to the favor and or the at the discretion of the bank. By the time the bidding is over the price is quite close to the retail price it had been forclosed on, or the bank decides not to accept the short sale in which case the property ends up either being re-forclosed or held by the bank (which by the way I wonder how long it's going to be profitable for the banks to continue to not lend and hold properties in their portfolios). Either way, at least in my community, the only AVAILABLE inventory are the REO's and the listings that are for sale by owner, and believe me, when something comes on the market that agents actually realize that they can sell (and I'm talking even in the 200-$300,000 range) there are multiple offers. When one of these offers is accepted in a day or so, the status is changed to pending meaning it's still NOT AVAILABLE!!! My thoughts: people are like sheep and need a good shepard, and until the media decides they want to portray a bull real estate market we're just going to keep hearing bad news, but the savy agents, investors, and homebuyers realize there has probably never been a better time to buy from a price point standpoint. Lending is frozen up because the banks are too busy trying to get too much for the same house that they own now due to foreclosure. When the banks across the board are ready to play ball and not allow ridiculous 1 and 2 year short sale processes to hinder inventory stats, the market will strongly return.
A short sighted view, in my opinion.
The "shadow market" for homes is huge. Realtors do not see or count the homes that banks are holding back or have not initiated foreclosure proceedings.
It will get worse before it gets better.
Relief is not "just around the corner".
I would venture to say it is more likely that there will be an apartment shortage. Buyers need a steady job, good income and credit score, and a decent downpayment in order to buy a house. I can't see there being that many qualified buyers in 2011, unless the economy recovers quickly. If the economy miracously stabilizes before 2011, and there is truly a housing shortage, then there will likely be a boom in the number of contractors building houses. In the meantime, we will probably see more people living with family. Things will get better, they always do.
It's the reason Buffett bought Clayton Homes and Burlington Northern.
There is going to be a huge housing shortage and Buffett now owns the largest manufactured home builder in the country AND a railroad extensive enough to deliver those homes all the way to California.
That's the "all-in bet" on the US that he's making.
Be greedy when others are fearful.
Based on the fearful comments posted here, he's right on time.
Brian if you believe this crap, I have a couple homes that you can buy and making a killing on in 2011 when there is a Real shortage!