I read a story in the USA Today dated 12/4 on the 6 reasons for our housing shortage nationally. These are all reasons I cover extensively in my Bubble class; but our country is experiencing a housing shortage that is finally getting attention this year.

  • Boomers are NOT moving—75% of younger Boomers aged 55-64 own their home and 79% of Boomers over 65 own their home. Realtor.com survey this year reported that 85% of Boomer homeowners plan to stay put over the next year. Until Boomers move out of their “big” homes, Gen Xer’s can’t move up and Millennials can’t buy the Xer’s home.
  • Investors are not selling their rentals as demand for their rentals is growing; thus their rents are rising too. And where else can investors get a cash-on-cash return of > 10% predictably and easily? Nowhere.
  • Owners are hooked on low mortgage rates—Frank Nothaft, chief economist at CoreLogic said, “That means the inventory of homes for sale, which is already very low, is likely to remain that way if we see higher mortgage rates.”
  • Builders are ignoring entry-level buyers—Builders say this is because of the high cost of land and labor to build homes.
  • Regulations add additional costs to the building of a new home and according to the NAHB regulations account for about 25% of the cost of a home.
  • Finally, current homeowners want to restrict supply to keep their home values high and they do this by complaining to their local city council or county commissioners when a new development may be built.

Each of these 6 reasons are very true and I don’t see any of these reasons going away. If anything I am worried that they may get worse before they get better.