American Housing Shortage

Issue 28 - April 16th, 2021

The American housing market is absolutely bonkers right now, and it is not just a problem in your specific neighborhood. Every single corner of America is experiencing this wild market whether you are buying a $50 million dollar home in Beverly Hills or a $350,000 dollar home in Memphis, TN. There are multiple factors at play leading to this craziness, and I really think it could take until the end of 2022 for some of this to level out across the country.

Here are some shocking numbers to help you wrap your head around the market today:

• New home construction has lagged since the 2007-09 recession

• According to a new Freddie Mac report, builders need to construct 3.8 million single-family homes just to catch up with existing demand, and the shortage is pushing up housing prices and threatening to slow down the entire economy

• In 2020, builders completed ONLY 65,000 entry-level homes, even as 2.38 million renters became first-time homebuyers

• The problem slowing down new construction homes is lumber demand pushing pricing to all time highs and pushing new home prices up by $24,000 on average across the country

• The national median home price hit $353,000 in March, up 17 percent from a year ago, according to a Redfin housing report — the biggest jump on record

• Mortgage rates are also near all time lows and continue to stay in this range

• Americans’ savings are at all time highs. This fact seems counterintuitive given the last year, but across the board Americans have more money in their savings than almost any time in history. With little to spend money on in terms of recreation or other items, a lot of this $$$ seems to be flooding the housing market

• There are more real estate funds dedicated specifically to buying Single Family Homes in our country than any other time in history. In some segments of the market, investors account for 20-30% of every home sale

• While sales of new and existing homes are projected to hit 7.1 million this year, Freddie Mac predicts that will fall to 6.7 million in 2022

I personally think there are a lot of older homeowners who have held their homes off the market due to covid concerns, and you could see supply rapidly tick up in some neighborhoods towards the end of the summer this year. The market will return to a more healthy point once construction catches up and more homes will come on the market as vaccinations continue to roll out.

Through the Fall of this year, I think you will continue to see mania in markets all over the country, but with supply improving from new construction and more homes likely being listed to capitalize on elevated home prices I think home price appreciation will cool off later this year and into 2022.

Newsworthy Links To Share

1. Flock Homes is rolling out an entirely new way for landlords to think about their rental properties. “Flock is a real estate company that offers rental property owners a tax-deferred transition to passive ownership in a pool of houses.” The Denver startup, founded by Ari Rubin and Matt Litovitz, who met at the Stanford University Graduate Business School, operates similar to a real estate investment trust or REIT. But rather than ponying up cash for shares, landlords contribute their investment properties, in what is called a 721 exchange. In return, they earn a piece of the dividend stream spun off by a much larger pool of homes. (Denver Post)

2. Opendoor continues to expand their “buy box” and also launched some new markets. They have increased the parameters of eligible homes by 35% and keep adding new price ranges, neighborhoods, year built eligibility, and home types. (Opendoor Blog)

3. HomeX, a home services platform for homeowners and service providers, has raised $90 million in a funding round led by New Mountain Capital. HomeX aims to “radically improve” home services by pairing service workers like plumbers electricians etc. with homeowners, both virtually and in person. It also has built software, and offers services for, contractors that are aimed at helping them drive customers and manage demand for their business. (TechCrunch)

4. STARBASE,TEXAS home prices are going through the roof. This is happening nationwide, but the “Elon effect” is really taking hold with speculative investors buying up anything in sight in the sleepy SpaceX launch town. Elon Musk has visions of turning this area into a bustling “Space-X sci-fi city”, and it will be interesting to see it unfold as everything typically is with Elon the Alien. (Inman)

5. Related and very cool to see this morning on Instagram: Tesla Cybertruck video from Giga Texas here in Austin. (Watch Video Here)

6. Doorstead is like Opendoor but for landlords. They manage your home and guarantee you a specific amount of rent. The number 1 worry on most landlords mind is “vacancy” risk, and the Doorstead team is attacking this very concern and rolling out what I think is one of the most interesting ideas in the prop tech space currently. They provide a “guaranteed rental offer” to landlords in less than 24 hours, and they manage the property end to end like a traditional property management firm. They just raised a new funding round, and you will see their product popping up in more markets across the country. (Geekwire)