{"id":169384,"date":"2024-03-15T13:33:05","date_gmt":"2024-03-15T19:33:05","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=169384"},"modified":"2024-03-21T21:19:30","modified_gmt":"2024-03-22T03:19:30","slug":"the-housing-shortage-will-get-worse-in-2024","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/the-housing-shortage-will-get-worse-in-2024","title":{"rendered":"The Housing Shortage Will Only Get Worse\u2014Here\u2019s What Investors Need to Know"},"content":{"rendered":"\n\n      <iframe loading=\"lazy\" frameborder=\"0\" height=\"200\" scrolling=\"no\" src=\"https:\/\/playlist.megaphone.fm\/?e=BIGPOC5707936033\" width=\"100%\"><\/iframe>\r\n  \n\n\n\n\n<p><span data-preserver-spaces=\"true\">There are many reasons property values have ballooned over the last decade: favorable demographics, monetary policy (low interest rates), stimulus, and migration patterns, just to name a few.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">But one of the most powerful and enduring variables that has pushed up pricing over the last decade is a shortage of housing units. Estimates vary on the size of this shortage, but they generally vary from about 1.5 million to 7 million units. And&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.realtor.com\/research\/us-housing-supply-gap-feb-2024\/?utm_source=Realtor.com+Economic+Research+Mailing+List&amp;utm_campaign=677df60051-EMAIL_CAMPAIGN_2020_04_26_01_53_COPY_01&amp;utm_medium=email&amp;utm_term=0_5fdb87a164-677df60051-468514505\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">according to Realtor.com<\/span><\/a><span data-preserver-spaces=\"true\">, the shortage is actually getting worse.&nbsp;<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">A Look Back<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">To truly understand the housing shortage, we need to look back to the lead-up to the great financial crisis and its ensuing fallout.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">As seen in the graph, housing starts (new construction projects begun) accelerated in the housing bubble era of 2000-2007, then promptly fell off a cliff. Housing construction did bottom in 2009, but it took until 2020 for construction levels to return to where they were in the \u201cnormal\u201d 1990s.&nbsp;<\/span><\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"1318\" height=\"450\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/03\/image1-3.jpeg\" alt=\"New Privately-Owned Housing Units Started (1990 - 2024) - St. Louis Federal Reserve\" class=\"wp-image-169388\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/03\/image1-3.jpeg 1318w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/03\/image1-3-300x102.jpeg 300w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/03\/image1-3-1024x350.jpeg 1024w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/03\/image1-3-768x262.jpeg 768w\" sizes=\"auto, (max-width: 1318px) 100vw, 1318px\" \/><figcaption class=\"wp-element-caption\"><em>New Privately-Owned Housing Units Started (1990 &#8211; 2024) &#8211; <a href=\"https:\/\/fred.stlouisfed.org\/\" target=\"_blank\" rel=\"noreferrer noopener\">St. Louis Federal Reserve<\/a><\/em><\/figcaption><\/figure>\n\n\n\n<p><span data-preserver-spaces=\"true\">There are several reasons why this recovery was so slow, but the primary reason is that many construction companies closed up shop when housing prices crashed\u2014and it takes a while for an industry to recover from such an event.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Of course, construction continued during this recovery, and according to Realtor.com, an estimated 13.4 million units were built from 2012 to 2023. Of those, 9.5 million were single-family homes, and 3.9 million were&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/finding-multifamily-properties\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">multifamily<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;units. Although this may sound like a lot of units, this number needs to be considered in the context of rising demand.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">In the housing market, the best way to measure macro-level demand is through a metric called household formation. A household in this context is any independent person or group of people who live on their own.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">So a family living together is a household. A group of unrelated roommates living together is a household. An individual living alone, also a household. Thus, to understand how demand for housing is changing, we need to see how many new households are formed (or dissolved).&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">From 2012 to 2023, 17.2 million households were formed. This means that even though 13.4 million housing units were constructed, there was a deficit of nearly 3.8 million units, according to Realtor.com\u2019s research.<\/span><\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"1366\" height=\"768\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/03\/image2-2.jpeg\" alt=\"Household Formations vs. Single-Family Home Starts (2012-2023) - Realtor.com\" class=\"wp-image-169389\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/03\/image2-2.jpeg 1366w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/03\/image2-2-300x169.jpeg 300w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/03\/image2-2-1024x576.jpeg 1024w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/03\/image2-2-768x432.jpeg 768w\" sizes=\"auto, (max-width: 1366px) 100vw, 1366px\" \/><figcaption class=\"wp-element-caption\"><em>Household Formations vs. Single-Family Home Starts (2012-2023) &#8211; <a href=\"https:\/\/www.realtor.com\/\" target=\"_blank\" rel=\"noreferrer noopener\">Realtor.com<\/a><\/em><\/figcaption><\/figure>\n\n\n\n<p><span data-preserver-spaces=\"true\">If we zoom in to just the last year, we can see that this problem is not improving. In 2023, 1.5 million units were completed, but 1.7 million households formed, growing the deficit by 200,000 units.<\/span><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span data-preserver-spaces=\"true\">Implications of the Trend&nbsp;<\/span><\/h2>\n\n\n\n<p><span data-preserver-spaces=\"true\">This has big implications for investors and the broader housing market: A housing shortage will provide sustained upward pressure on&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/on-the-market-163\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">housing prices<\/span><\/a><span data-preserver-spaces=\"true\">. To me, this seems clear, but I want to offer two caveats.&nbsp;&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">First, as mentioned, there are many variables that impact the housing market, and the supply of homes is only one of them. I believe supply-side forces will help support housing prices for years (decades?) to come\u2014but that doesn\u2019t mean housing prices cannot fall, nor does it mean they will grow rapidly. There are other forces in the housing market, like&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/on-the-market-145\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">affordability<\/span><\/a><span data-preserver-spaces=\"true\">&nbsp;or the labor market, that could provide downward pressure and counteract the impact of low supply.&nbsp;<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Secondly, as with all real estate, the impact of this trend will be regional. Some markets will have sufficient supply or even an excess, but most will not. According to Realtor, 73 of the top 100 markets face a deficit, with some high-growth markets in Texas and Florida facing the largest shortage.<\/span><\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"1728\" height=\"1384\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/03\/image3-2.jpeg\" alt=\"\" class=\"wp-image-169390\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/03\/image3-2.jpeg 1728w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/03\/image3-2-300x240.jpeg 300w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/03\/image3-2-1024x820.jpeg 1024w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/03\/image3-2-768x615.jpeg 768w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/03\/image3-2-1536x1230.jpeg 1536w\" sizes=\"auto, (max-width: 1728px) 100vw, 1728px\" \/><\/figure>\n\n\n\n<p><span data-preserver-spaces=\"true\">So just remember that this trend won\u2019t be felt equally everywhere. For investors, I recommend that you research the relationship between housing construction and household formation in any market that you\u2019re investing in. Understanding supply dynamics is super important.<\/span><\/p>\n\n\n\n<p><span data-preserver-spaces=\"true\">Once you\u2019ve done that&nbsp;<\/span><a class=\"editor-rtfLink\" href=\"https:\/\/www.biggerpockets.com\/blog\/real-estate-investment-analysis\" target=\"_blank\" rel=\"noopener\"><span data-preserver-spaces=\"true\">analysis<\/span><\/a><span data-preserver-spaces=\"true\">, let me know what you find in the comments below.<\/span><\/p>\n\n\n\n<div class=\"wp-block-group has-slate-200-background-color has-background\"><div class=\"wp-block-group__inner-container is-layout-constrained wp-block-group-is-layout-constrained\">\n<h2 class=\"wp-block-heading has-text-align-center has-theme-slate-dark-color has-text-color\">Make Easier and Smarter Financing Decisions<\/h2>\n\n\n\n<div class=\"wp-block-media-text has-media-on-the-right is-stacked-on-mobile is-vertically-aligned-center\" style=\"grid-template-columns:auto 34%\"><div class=\"wp-block-media-text__content\">\n<p>Deciding how to finance a property is one of the biggest pain points for real estate investors like you. The wrong decision may ruin your deal.<\/p>\n\n\n\n<p>Download our&nbsp;<strong>What Mortgage is Best for Me&nbsp;<\/strong>worksheet to learn how different mortgage rates impact your deal and discover which loan products make the most sense for your unique position.<\/p>\n\n\n\n<div x-data=\"frictionlessSignupForm()\" class=\"button-account-type alignleft\">\n\n  \n\n  <!-- Guest Button -->\n      <template x-if=\"!$store.wp.isMember()\">              <button x-on:click=\"$store.wp.displaySignupPrompt()\" class=\" btn-shape inline-block no-underline has-background has-theme-blue-background-color has-text-color has-white-color\">Sign Up to Download<\/button>\n          <\/template>  \n  <!-- Free Member Button -->\n      <template x-if=\"$store.wp.isMember() &#038;&#038; !$store.wp.isPaidMember()\">              <a href=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/03\/MARCH-2024-Mortgages-worksheet.pdf\" target=\"_blank\" x-on:click=\"window.analytics.track(&#039;Blog | Market Intelligence | What Mortgage is Best for Me?&#039;, {\n            referrer: &#039;https:\/\/www.biggerpockets.com\/blog\/the-housing-shortage-will-get-worse-in-2024&#039;,\n            account_type: &#039;free&#039;,\n          });\" class=\" btn-shape inline-block no-underline has-background has-theme-blue-background-color has-text-color has-white-color\">Download the Worksheet<\/a>\n          <\/template>  \n  <!-- Pro Member Button -->\n      <template x-if=\"$store.wp.isPaidMember()\">      <a href=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/03\/MARCH-2024-Mortgages-worksheet.pdf\" target=\"_blank\" x-on:click=\"window.analytics.track(&#039;Blog | Market Intelligence | What Mortgage is Best for Me?&#039;, {\n          referrer: &#039;https:\/\/www.biggerpockets.com\/blog\/the-housing-shortage-will-get-worse-in-2024&#039;,\n          account_type: &#039;pro&#039;,\n        });\" class=\" btn-shape inline-block no-underline has-background has-theme-blue-background-color has-text-color has-white-color\">Download the Worksheet<\/a>\n    <\/template>  \n  <!-- Frictionless Popup -->\n  <\/div>\n<\/div><figure class=\"wp-block-media-text__media\"><img loading=\"lazy\" decoding=\"async\" width=\"1000\" height=\"1000\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/02\/MI-March24_Blog-Thumbnail_v2.png\" alt=\"what mortgage is best for me\" class=\"wp-image-168724 size-full\" title=\"\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/02\/MI-March24_Blog-Thumbnail_v2.png 1000w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/02\/MI-March24_Blog-Thumbnail_v2-300x300.png 300w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/02\/MI-March24_Blog-Thumbnail_v2-150x150.png 150w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/02\/MI-March24_Blog-Thumbnail_v2-768x768.png 768w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2024\/02\/MI-March24_Blog-Thumbnail_v2-200x200.png 200w\" sizes=\"auto, (max-width: 1000px) 100vw, 1000px\" \/><\/figure><\/div>\n<\/div><\/div>\n","protected":false},"excerpt":{"rendered":"<p>The U.S. is short several million housing units, and the situation is only getting worse. Supply gaps continue to widen on a national and regional level, and 73 out of the largest 100 markets are experiencing shortages. What should investors expect going forward?<\/p>\n","protected":false},"author":108611,"featured_media":169391,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[8,7119],"tags":[],"class_list":["post-169384","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate-trends","category-biggerpockets-daily"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/169384","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/108611"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=169384"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/169384\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/169391"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=169384"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=169384"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=169384"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}