Some of the oldest continuously inhabited housing in the United States is in Taos, New Mexico where there are pueblo’s that have been continously inhabited for almost 1,000 years (www.smithsonian.com May 2012).
In the history of mankind housing has evolved to include structures of every conceivable shape. We have lived under trees, in caves, built hovels and established movable, nomadic cities in deserts and on prairie lands. But wait, there’s more!
Our home building skills have evolved to the point that certain countries have a surplus of houses; talk about nailing the technology.
Question? What century are we discussing? Was there ever, in the history of mankind, a housing surplus prior to financial engineering? Or is housing construction surpluses a modern economic happenstance exclusively?
Historically, there have been several incidence of surplus housing. Most times had to do with disease wiping out huge portions of the in-place population. Or forced migration caused by war or famine.
In modern times surpluses are often caused by job dislocation- jobs moving from one metro to another metro (as when a large auto manufacturer relocates).
Anyone following U.S. housing starts through the recession can identify the precipitous drop in new construction. I believe this lack of construction is playing out in the rental market today with higher rent growth, and will play out tomorrow with a shortage of available housing.
The beginnings of “tomorrow” is 2014. One reason for the delay is the egregious time devoted to clear homes in various stages of foreclosure. These foreclosures will clear, but this is will take at least a year longer. Once these foreclosures come on the market in-force it will appear, momentarily, as if the U.S. has a surplus of housing. And then they will be gone. This is a one-time shot of inventory.
In a recent interview on Bloomberg Prof. Case (of the Case Shiller Index) stated that housing starts are now one third of the peak from when construction was adding over $600B to Gross Domestic Product (GDP).
Prof. Shiller stated than even today, one quarter to one third of homes remain “under water” with mortgage balances exceeding home values. He noted, concurrently, that construction starts remain below the level necessary to replace housing removed from service and below the level necessary to keep pace with population growth.
The elasticity of this rubber band will burst in a year or two as housing starts remain below levels necessary to replace dwelling lost through a-typical means; fire, flood, disrepair and age.
As the saying goes “its’ hard to dig yourself out of a hole”. The same applies to a soon-to-be shrinking housing stock.
Mr. Wilhoit is the author of two books: How To Read A Rent Roll: A Guide to Understanding Rental Income and Multifamily Insight Vol 1 – How to Acquire Wealth Through Buying the Right Multifamily Assets in the Right Markets.
For information on property management audio courses, books and our live weekly leadership academy, visit PowerHour Books and Courses page at http://powerhour.com/propertymanagement/booksandcourses
About This Blog
Multifamily Insight is dedicated to assisting current and future multifamily property owners, operators and investors in executing specific tasks that allow multifamily assets to operate at their highest level of efficiency. We discuss real world issues in multifamily property management and acquisitions. This blog is intended to be informational only and does not provide legal, financial or accounting advice. Seek professional counsel. For more information, visit: http://www.MultifamilyInsight.com