UPDATE JULY 17, 2024 – So far, no objections to what I wrote below. I wanted to add some data. According to Zillow, inventory is higher than last year in 48 out of the 50 Major Metropolitan areas. It rose last month in 45 of the 50 markets. If we are so short on housing, why aren’t all of the houses for sale bought instantly? How can the inventory possibly increase? And, no, it is not because of high (not really high, around where they should be) mortgage rates. Simply put, the forever housing shortage rant is a hoax. False information. Propaganda.

JULY 1, 2024 – Here is your chance to email me why NAR and the NAHB may be even remotely right about our housing shortage and why I am wrong. I researched the intraweb, as my step-daughter jokingly refers to it, and found that NAR has said we have a shortage of 4.5 to 5.5 million housing units. Their logic is the annual number of houses built since the Year 2000 has been below what was needed. To paraphrase Henry Ford, that is bunk.
Let’s look at some facts and some math. First, the demand for houses by 18-55 years olds today is about 25% (!) of what it was when Baby Boomers were the same age. Second, annual population growth has declined significantly from around 2% at the start of this century to 0.53% last year. I have seen as high as 0.7% in the past few years.
Yes, total population has obviously increased over time. But, it is not double or triple what it was 20 or 40 years ago. Demand for housing is about 1/3 to 1/4th of what it used to be. So, you cannot continue to forecast based on 1980s or 1990s rates. As I note in other posts, annual GDP of +3% or +4% has been replaced with a good-excellent range of +1% to +2%. Everything is slowing down and will continue to slow down for decades ahead.
To the math….As of today, the intraweb says we have 341,814,420 people. Let’s say last year’s growth rate was low and the 0.7% rates before that were high. We will use 0.6%. (I note that CoStar uses +0.5% annually for the next 5 years.)
That means this year’s population growth is about 2,050,000 people. Average household size was 2.53 people in 2020. It too has been declining for decades. Let’s assume it is down to 2.40 today. The math says we need about 850,000 new housing units for the upcoming years.
Laughingly, NAR says we need 1.8 million new housing units and since only 1.4 million are being built we will add to our shortage. In fact, based on real math, we will have an oversupply of 550,000 housing units brought onto the market this year alone!!!! Every report I see shows apartment vacancy rates are way up from 3 years ago (about doubled in past 3 years nationwide!) and new homebuilders have a crisis of oversupply. NO ONE but NAR suggests we are not building enough housing units.
So, here’s the riddle to me. If we are short millions of housing units, wouldn’t vacancy rates for SFRs and apartment properties decline each year? If we aren’t building enough units, wouldn’t vacancy go down? Wouldn’t we see people lined up to get into the next apartment or SFR unit that becomes available?
According to CoStar, the USA had 927,018 vacant apartment units in 2021. As of today, we have 1,544,497 vacant apartment units. Over 600,000 apartment units have become vacant in a period where NAR screams that every year we are increasing our shortage by hundreds of thousands of units. Where is the logic? This doesn’t even include our 10 million vacant SFRs! (BTW, this count does NOT include second/vacation homes.)
I have contended for years that if we didn’t build a single housing unit nationwide for 5-10 years we still would not absorb all of our vacant units.
I look forward to your thoughts. The one I will say that doesn’t work for me is the vacant units are not where the people want to be. Some may be. But, most of the new supply for decades has been in the Sun Belt where the greatest demand has been. And people can live anywhere and move anywhere (especially since 2020). A few units might be old and badly located. But, old product is removed from the stockpile annually.
I will leave this one at that. Depending on feedback, I might follow up with another post on the subject.
Shalom,
The Mann
GeorgeRMann@Aol.com