Understanding the Housing Supply Conundrum
Keith Weinhold, the founder of Get Rich Education and host of its podcast, posits that the United States is currently experiencing a housing market crash, not in prices, but in supply. He points to the dramatic decline in available housing since the pandemic’s onset in spring 2020, highlighting a more than 50% drop in active listings from July 2016 to September of this year. Weinhold argues that this shortage is more critical than a mere dip in property values, as it signifies a fundamental inability to accommodate the population’s housing needs. This has resulted in increased rental periods for potential homeowners, affordability struggles for renters and students, and a rise in homelessness.
The challenge of addressing this shortage is compounded by high land costs, regulatory fees, and stringent building codes, which hinder construction efforts. Despite these obstacles, the demand for housing persists, driven by demographic shifts such as the maturing millennial generation, immigration, and household formation among baby boomers. This enduring demand, coupled with limited supply, underpins sustained home prices, providing a buffer against a price crash.
For real estate investors, this presents a unique landscape. While first-time buyers face daunting prices and mortgage rates, investors may anticipate heightened demand for rentals and potential rent increases. However, Weinhold cautions that due diligence is crucial, emphasizing the importance of location, tenant income stability, and comprehensive cost assessments when considering property investments. He concludes by reiterating his belief in the certainty of a housing crash, one rooted in supply scarcity rather than price volatility.