Is A New Housing Bubble On Its Way In Livermore, CA?

Is A New Housing Bubble On Its Way?

You may find this hard to believe, but a housing shortage could very well be on its way.

We all know the recession has had a devastating effect on the housing market; people are losing their homes and renting, and others are simply too scared to buy. As a result the home building business has taken a huge hit as there is no need, or money, to build new homes at the moment.

But what will happen when the economy recovers and all those renters and scared buyers want to start buying? Where will people go? Will they purchase homes already built, or will they want new ones?

Some believe they’ll want new homes, and that could pose a problem.

According to reports, the nation’s homebuilders are simply not building enough homes to keep up with the potential demand. In April, only 672,000 new homes were started, an annualized rate and less than half the long-term run rate needed to meet the nation’s natural population growth.

Among other reasons, the new home shortage is due to the countless number of builders and contracting businesses that went belly up; fewer builders means fewer new homes.

But there are some who believe there are plenty of homes, if not a surplus.

Those who doubt a new housing bubble is approaching cite what they consider to be a large “inventory overhang” – which they feel will provide a cushion to offset the increased housing demand. According to the Census Bureau, as many as 7 million homes are sitting vacant, but are not for sale.

From CNN Money: Is a housing shortage coming? By Les Christie, Staff Writer

…So far, the shortfall has been masked by a weak economy that has put a damper on home buying. Once the job market rebounds, however, people will look to have their own homes again. This pent-up demand could get unleashed on unprepared markets, causing shortages and rising local prices.

…“The housing market hasn’t been this way before,” said Nicolas Retsinas, director of Harvard’s Joint Center for Housing Studies. “The gravity of the problem is deeper and the challenges different. You have to get through that inventory.”

The inventory number, however, can be deceiving for two reasons: People may not want to live in hard-hit areas where the houses are (think: California exurbs and Detroit neighborhoods) or the homes may be beyond repair.

“Many of these vacant homes may not be habitable or are in locations where nobody wants to live,” Gaines said.

…Hard times also persuaded builders to postpone purchases of land they could prep for future development. It will take them that much longer to gear up production once the housing market improves.

Leave a Reply

Your email address will not be published. Required fields are marked *