What is a housing shortage?
A housing shortage is when the demand for properties doesn’t match the supply. The United States is currently facing a housing shortage as there aren’t enough homes to fulfil the demand in the market. This has pushed home values to all time highs.
Freddie Mac released a report stating that the United States was facing. A housing shortage of over 2.5 million units. However, the market has been struggling to keep up with demand since 2010.
What is the problem?
The United States is going to require a large amount of investment into residential real estate development. If the demand is there why aren’t developers jumping at this opportunity? Construction costs have reached all-time highs and developers are seeing their return on investments decrease. This is preventing the overdue residential development boom that the United States needs.
What problems are construction companies facing?
Aside from construction costs reaching all-time highs, construction companies are also struggling with a shortage in the supply of construction materials, increasing zoning laws, supply chain issues, inefficiency caused by the covid-19 pandemic, costly third-party reports, and a lack of experienced employees. All of these issues have contributed towards the decrease in construction profit margins.
What is the solution?
The United States may need to issue large government grants to residential real estate developers to shorten the supply and demand gap and issue large government grants to construction companies battling with increasing construction costs.
As long as all of these issues remain, the supply and demand gap for homes will only continue to grow. This will continue to push property values to all time highs. Which is a positive for real estate investors benefiting from their properties appreciating.