Why We Have a Shortage of Homes for Buyers

January 12, 2022
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The housing market is currently in upheaval, buyers fighting for the few listings that exist, and many not winning, especially in the entry level market, $175,000 to $300,000. Agents know the frustration of making multiple offers for clients, only to lose out to cash deals or preferred financing. Just in the the last 90 days, Boone, Hamilton and Hendricks counties saw 988 sales between $175,000 and $300,000, with 62% of those sales selling over-list. 65 of these sales went over-list by between 10% to 24%, a substantial amount when the search criteria topped at $300,000.
 
In analyzing National New Home Starts from year 2000 to 2020, we begin to see the explanation on the current situation. Bottom line first. We are currently at a deficit of 9,700,000 homes over the trend of the first 8 years of the 2000's.
 
How did this happen? Years 2000 to 2007 saw new home starts averaging 1,730,000 per year. The housing crisis of 2008 to 2013 saw New Home starts drop from from 1,730,000 average to 727,000 per year. Bouncing back somewhat in 2014 to 2020, we see housing starts averaging 1,200,000 per year. That 1,200,000 seems substantial for the last 7 years, but remember that number is still 500,000 home starts PER YEAR below the 2000-2007 trend.
 
Do we see a correction any time soon? The housing crash saw builders and contractors leave the business for 5-7 years, so the construction process is still way behind schedule. Watch for this blog to be continued shortly.

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