House price competition is fierce across America. House bidding wars stories are quite common now. For example, in Salt Lake City, 9 out of 10 offers faced competition, according to Redfin’s survey of 24 major markets. It was followed by San Diego (78.9%), the Bay Area (77.1%), Denver (73.9%), and Seattle (73.8%).
- According to the National Association of Home Builders, the primary reason longtime home searchers haven’t bought a home yet is that they keep getting outbid.
- According to a Redfin survey in January, over half of all buyers, 56%, are facing bidding wars in their offers. That is up from 52% in December.
- More than half of homes are now going under contract in less than two weeks.
See a video report here.
CNBC – Screams headlines that tell us, “U.S. housing shortage will be around for years to come.” The housing shortage that began before the pandemic will stick around for a long time as market demand soars, the chief executive of home builder Taylor Morrison told CNBC. However, don’t forget Morrison is selling houses.
Forbes – Another headline screams, “The Housing Shortage Is Worse Than Ever – And Will Take A Decade Of Record Construction To Fix.”
Looking at primarily the single-family housing market, we ask the question; is there really a housing shortage in 2021?
Let’s look at some basic demographics and housing data.
- US population is growing at a slowly declining rate of only 0.58% – see here. One would think that the demand for homes would be correlated to population growth.
- The percentage of US citizens owning their own homes has declined from 69.1% in 2005 to 65.6% in 2021. This indicates mostly a flat demand for new individuals/families wanting to buy homes relative to population growth.
- Mortgage rates have moved around, but there has been no major shift in rates that can explain the sudden “hot” real estate we see today – see here.
Drilling further into the housing data, see the following chart from Statista on the number of US detached single-family homes. It shows a steady rise of about 400,000 new homes in total per year in recent years.
Each year, many homes become obsolete and/or are destroyed through fire and other natural disasters. The best estimates are that about 3 homes per 1000 are lost per year that need to be replaced – this represents about 249,000 homes per year.
New house starts are just 3.5% below their 60-year average, indicating market equilibrium despite a brief dip in early 2020. In 2021, housing starts have even accelerated further with supply. Here are some highlights.
- In the last 12 months, there have been 1.6 million new housing starts.
- There were 1.4 million new housing starts in 2020.
- 72% of new house starts were single-family housing.
- New house starts represent 95.2% of housing permits.
In another way to look at housing supply, see below the months’ housing supply which is the ratio of houses for sale to houses sold. This statistic provides an indication of the size of the for-sale inventory in relation to the number of houses currently being sold. The months’ supply indicates how long the current for-sale inventory would last given the current sales rate if no additional new houses were built. Though a dip due to Covid did occur in 2020 from an already elevated rate, the supply should be back to historical norms.
The other factors to be considered but would normally affect longer-term trends. These factors could include demographic changes (e.g., baby boomers retiring), family formation size, cultural migrations (including immigration), natural disasters, and/or various financial factors. However, they are of note. Of course, regional supply and demand can distort the market – real estate is all about location, location, location.
Considering the population demographics, the loss of obsolete or destroyed housing, and the new housing supply, the market should be in equilibrium.
So again, we ask the question; is there really a housing shortage in 2021? Why all the scary headlines?
The unfortunate answer may lie in what we all have been hearing about, the “Great Reset.” Tyrannical technocratic governments, pandemics, mono-media narratives, social media cultural control, and central bank -controlled economies are the state of play. Owning a home (or not) is a mere part of this whole puzzle many of the powers to be are preparing for us.
Remember, they want you to “own nothing and be happy.” At the top of the list of things you definitely shouldn’t own is your own home. Look at some recent headlines that are trying to build the narrative to turn us into a nation of renters.
- Bloomberg ran an article headlined, “America Should Become a Nation of Renters.”
- Vox has a piece titled, “Homeownership can bring out the worst in you.”
- A story ran last month to deflect one’s fears, “Blackrock Is Not Ruining The Us Housing Market.”
- The Atlantic, which ran this story in 2019, “When Wall Street Is Your Landlord.”
Prior to Covid, we did not see this madness in housing prices. When the Covid pandemic hit, economies shattered, and yet housing prices began their meteoric rise. Why? The pandemic unleashed unprecedented government currency debasement and the fear of potential inflation. This phenomenon sent the real estate market into a frenzied buying panic (starting in Q2 2020) to beat this perceived inflation that was on the horizon.
Since the pandemic, average hourly wages have only risen around 5%. However, median house prices have risen about 17%. So, though there is no real housing shortage (i.e., individual/family to physical housing ratios), there are few houses available to buy – hence the price rise. Logic would tell us that this trend can not continue, and the current price bubble will need to return to the mean. But maybe not.
Like other assets (i.e., stocks), major players assisted by Fed free money can buy up much of the housing assets forcing many renters into the renter class. Government housing programs that can contract with these same major players can cover the less fortunate. Here are some additional factors that give evidence and fuel to this phenomenon.
- Foreign buyers may add to housing woes, prices – see here.
- Wall Street firms are buying up single-family homes – see here.
- The number of buyers of a second home soared 128% year-over-year in March 2021.
- The Covid pandemic, changes in demographics (e.g., Boomer retirement), economic downsizing have also contributed to increased demand – see here – though this would mean some regions gain at other’s loss.
- The share of all-cash sales to existing-home sales surged to 25% in April 2021 as non-first-time buyers are paying all cash. This is further evidence of economic downsizing.
For those who believe that you have beat the system and speculated along with major players – they may have other ways to force you into the renter class. Local governments strapped for cash will raise your real estate taxes to force you to sell – then tax away your gains. If you don’t sell, and to pay for the “original sins” of America, the draconian inheritance tax increases to achieve equity in generational wealth will take care of the rest. Major players with government help will find ways to avoid these problems.
The claims of low housing supply may be an engineered market distortion for a greater purpose. Are Americans losing the American dream of owning a house for the greater good of humanity? Don’t worry, you “will be happy.” If not, the corporate state who forced you to rent from them will evict you.