A housing shortage will likely be another effect of the housing bubble, even after the housing market crash, foreclosure epidemic, credit crisis, massive unemployment and other hardships fade. When the U.S housing market crashed and took the rest of the economy down with it, banks stopped home lending, home buyers stopped buying and home builders stopped building. Unwilling banks have allowed apartment construction to dry up as well. Even with a glut of housing inventory in 2010 and an emerging shadow market of foreclosures, a housing shortage in 2011 is forecast when a growing population exceeds available shelter.
Housing shortage masked by market crash
A housing shortage in 2011 could happen as the economy recovers, jobs are created and the desire to create new households returns. CNNMoney.com reports that the nation is not building enough homes to keep up with potential demand. Just 672,000 new homes were started in April, less than half the long-term rate needed to meet population growth in the U.S. The housing shortage, which may already exist, has been masked by the housing market crash. When job creation returns, so will the home buyers. Pent-up demand could catch the U.S. housing market off guard, leading to a housing shortage and rising home prices.
Housing inventory won’t keep up
A housing shortage seems unlikely as the U.S. housing market has been preoccupied with foreclosures and excess inventory. But Forbes.com reports that if America can’t regain its focus on building homes, the housing market will have a much bigger problem. Brian Wesbury, chief economist at First Trust Advisors, told Forbes that 1.5 million houses a year need to be built to keep up with population growth. Current inventory of new and existing homes is enough to accommodate the housing market for about 7 months.
Credit crisis handcuffs homebuilders
The upcoming housing shortage is being boosted by the credit crisis. The Los Angeles Times reports that home buyers aren’t the only ones who have to deal with tight-fisted banks. Builders are having a hard time borrowing the money they need to buy land, develop lots and construct houses. Most builders aren’t starting houses today until they either have nothing else to sell or buyers have an approved mortgage application in hand. A builder is more likely to get credit now with a solid contract from someone who has a mortgage and doesn’t have another house to sell.
Rental market shortage worse
The housing shortage of 2011 is expected to hit the apartment rental market even harder. According to the National Association of Home Builders, new multifamily construction has been crippled by the credit crisis. That leaves the industry unable to meet the increased need for market-rate and affordable apartments that is expected to accompany economic recovery beginning next year. The two- to three-year timeline required to build apartment communities won’t be soon enough for a large number of Generation Y professionals and newly formed households expected to need them.
Lock in low rent now
The apartment shortage and increased demand will lead to higher rents. Mai Ling Slaughter at MSN.com says that the current market is on the renter’s side, with vacancies at a 30-year high and plenty of perks available for both current and new tenants, but it could all come to an end soon. Now may be the best time to sign an 18-to 24-month lease to lock in that low rent price.