Is a Housing Shortage Headed Our Way?

by Kevin on June 22, 2010

A housing shortage? Wait… what?

I read this intriguing article last week at CNN Money: Is a housing shortage coming?

Of course in the current economic conditions I was taken aback by the title. They did an effective job of at least getting my attention because I clicked right on through to see how crazy the author must be.

A New Housing Bubble on the Horizon?

To be fair the article does provide both sides of the discussion — it starts with arguing a new housing shortage is around the corner and finishes with other points on why that isn’t possible.

The argument for a housing shortage is the number of new housing starts in April. The number of starts was around half of what the traditional, long-term growth rate for the country would be.

Obviously if a dramatically smaller number of homes are built, then eventually we would run out of supply, prices would go up, and we’re back into making money on flipping homes.

What About Excess Home Supply?

What I think this point completely misses is the incredibly large amount of homes that could become supply overnight. We’re talking millions of homes. This is discussed a bit later in the article.

Why aren’t these homes counted in current supply? Maybe they’ve been foreclosed on, or maybe they just sit vacant. Either way there isn’t a for sale sign sitting out front.

Granted some of those homes will be in such poor condition that either no one will buy them or cities will eventually bulldoze them to prevent crime. (For example, I’ve recently read that Detroit plans to dramatically reduce the overall size of the city by bringing citizens in closer to core services, and bulldozing street by street the vacant homes.)

Would a Housing Bubble Be Good for the Economy?

I’m not an economist, but as a home owner I would love for a housing bubble to pop up! Sure, my home is worth double what I paid for it! Just sign on the dotted line!

Plus there would be a nice jump in the economy if people were suddenly flush with cash from selling homes.

As much as a housing bubble would help me personally, and even the economy in the short-term, I think it would be very bad overall.

I think the boost to the economy wouldn’t last, and in a few years we would find ourselves right back where we currently are.

It will be really interesting to see how things play out, but I want to know what you think. Would you like to see a housing bubble? What do you think it would to do the economy?

{ 2 comments }

Tax Marketing June 26, 2010 at 6:24 am

I think the chance of a shortage is pretty small. It would be nice to see a bubble (in the other direction), but don’t hold your breathe.

Darwin's Money June 30, 2010 at 12:30 am

I think it’s another off-the-wall attention getting headline because some obscure economist touted it, just like Gold will hit $5,000/oz and the Apple will hit $35/share or whatever. Housing’s a mess. It’s being propped up artificially by absurd government subsidies whereby renters (taxpayers) are paying $6500-$8000 for people to buy houses who were going to buy a house anyway. A complete scam and money grab. But such is the “redistribution of wealth” era we now live in. The market should have been allowed to clear. All this tinkering is doing is prolonging the inevitable. Perhaps in 5 years, someone can look back and say, “see, I told you so, there’s a shortage”, but there’s no shortage for the next few years when the free market takes over again after this final round of credit extension nonsense.

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