This article highlights what we’ve been discussing internally for the last year – when “locked-in” people finally decide that they’ve waited long enough and want a new/different house, it’s likely going to cause a housing shortage and price spike. Think normal demand + release of pent-up demand means the demand side of the equation will see a big increase. But, with the data that we’ve seen showing a comparably low number of new homes being started, the supply side is already UNDER the current demand – which is why prices have continued to climb despite higher interest rates.
Then, add the 3rd factor – it will take 12-18 months for the supply to START to recover, much less FULLY recover. After being burned with standing inventory during this low demand period, builders are going to be slow to believe that the demand is real, and then it takes 9-12 months to acquire permits and build a house.
This leads to what we’ve been thinking for the last year – once demand starts to open up, it’s quite likely that there will be a serious housing crunch for 2-3 years.
Source: Morrow, A. (2024, September 18). The Fed’s Rate Cuts Could Have Unintended Consequences for the Housing Market. CNN.
