Anyone who has suffered through an Economics class recognizes (and possibly cringes too) the supply vs. demand chart. Heck, my 6 year old daughter could tell you that daddy has had too many houses to sell and not enough buyers. Well, that’s all changing, and it’s changing faster than anyone I think could have predicted. As hard as it might seem to believe, we are actually about to face a serious home inventory crunch. When the supply is down, demand goes up, when demand goes up, so does the price. See it’s all in the chart over there ←
In the January 2011 Utah County Housing Statistics Report, one statistic in particular caught my eye: new listings were down 13.1%, which was substantial. Even more alarming was when I received the February 2011 Utah County Housing Statistics Report this week and saw that new listings were down 25.0% putting us down 19.3% down year-to-date! If that isn’t a clear sign that supply is heading south, then maybe the cover story of this month’s Fortune Magazine might be a stronger indicator.
Mike Castleman is the founder and CEO of a company called Metrostudy, he’s spent more than three decades tracking real-time data on the country’s inventory of new homes. “I’m a dirt-road economist who sees what’s happening on the ground, and in 35 years I’ve never seen a shortage of new construction like the one I’m seeing today,” declares Castleman. “The talking heads who are down on real estate will hate to hear this, but America needs to build a lot more houses. And in most markets the price of new homes is fixin’ to rise, not fall.”
Castleman claims that this recovery will look like all the others: It will bring a severe shortage of housing. “We’ll get a big surge in demand and the drywall companies will take a long time to ramp up, and it will take years to get new lots approved. Buyers will show up looking for a house in a subdivision, and all the houses will be sold. The builders will tell them it will take six months to deliver a house.” But those folks, says Castleman, will be set on buying a place. “And they’ll want it so bad they’ll bid the prices up!” In other words: Beat the crowd.