We don't know if that is the primary cause though. The US population was growing at a quicker rate for much of it's history, and that population was more rural, and a number of other reasons we can't rely solely on historical data for our predictions of current behavior. With a closer to zero population growth rate and a more urbanized population we would expect there to be fewer houses built.
Additionally, the pure supply and demand argument is insufficient because it does not explain why we have failed to create the additional supply to meet the demand. In a pure sandboxed supply/demand analysis with no other factors, we would expect to see supply increase as demand increases since in theory it means building homes is more profitable. The high school version of supply/demand is that they balance eachother eventually and the timeframe over which that happens is influenced by the elasticity in price of the good in question. Something about how the housing market functions has changed in some locations.
location, location, location. Much of the housing price increase has occurred in areas that are doing well economically, but have more or less maxed out the building density currently legally allowed by zoning. today you could build so many houses in Detroit and yet that wouldn't really ease the housing crisis in a place like the Bay.
there is also, at least anecdotally, a shortage of skilled tradespeople across construction in general. post-2007 basically reduced the incoming pipeline to zero, and so now there is this missing labor cohort that would be really useful right now.
Yep I agree that a large contributing factor in all of this has to do with location.
The shortage of skilled labor is another instance where we need to ask why supply is not meeting demand. I think in the case of the supply of skilled construction workers it is not difficult to come up with a plausible explanation that doesn't require any malicious actors.
Anyway, I'm not really trying to make a political point or give everybody my own pet theories as to how this happened. I'm mostly just trying to make the point that the way this issue is generally discussed in the media is economically illiterate at a pretty fundamental level.The observation in the media that supply is not meeting demand is worthless on account of that not being a meaningful statement.
Wages for construction workers have not kept up with inflation, much like other fields. Unless you're a Master - tier specialist in your field, you will probably be making at best $15/hr to $25/hr with minimal (if any) benefits.
There's simply few reasons to enter the field and risk long term health issues when you can make the same amount, or better doing paperwork in an office.
we also had a whole new category of job (gig economy) and a massive increase in a related category (delivery) show up for unskilled work. In general there seems to be a labor mismatch now, and existing regulations certainly don't help (e.g. you need to not have smoked weed in the last six months to hold a CDL to drive a truck around, and these days that probably eliminates a good chunk of that skill segment)
Additional supply did come on, and has dropped recently in response to rates.
It's really not more than high school supply/demand. There are just a good number of factors which make up each at each location, and at least one of them is large and unpredictable (interest rates). There is always a lag on the supply side because only so many houses can be built at any time. It's the same for many commodities like oil and gas.
Actually computing a good supply or demand curve has always been the difficult part, not the theory. But supply lag and interest rates make up a big component of property supply and demand.
I think that's what the person above you meant as well, that prices being high due to a lack of supply is not controversial nor is it very interesting.
Yes and with supply not meeting demand at least here in York county pa and Baltimore county md.. bidding wars just started to be the norm again and prices are increasing. I bid on a 200k home (a real fixer upper to flip in two years after living in it & remodeling it) last weekend it had 20 bids and I lost out to an all cash offer(supposedly per my real estate agent). That same weekend a 40 year old log cabin ($430k) had an open house where 30 showed up and it was sold within 8 hours.
Up until this month prices in this market were declining and homes sitting on the market for weeks to a month or more with lots of price drops.
It's weird spring comes around with interest rates just as high and we are back to bidding war frenzy that was 2021/half of 2022.
