8 ms·

Population is flat over the last two years, while housing units are up and the construction rate is all time high. There is no crisis, just rampant speculation

Population is flat over the last two years, while housing units are up and the construction rate is all time high. There is no crisis, just rampant speculation that ate through active inventory. The actual data is very clear on this (FRED), despite the word of mouth "shortage" narrative. Now that the narrative is turning, inventory is skyrocketing as you would expect, and we will be in a glut within 6 months. Look at the "all time low inventory" of the 2000s as another example. How quickly did the inventory narrative collapse back then? A few months

jelliclesfarm 4y ago
I don’t know why you are downvoted. You are right. Upvoted.
- adam_arthur 4y ago
  Yup, I can cite as needed when the angry comments show up. Too many with a vested belief in the narrative.
  - epistasis 4y ago
    You are preventing an extremely selective and unrepresentative view of the stats.
    - adam_arthur 4y ago
      Prove me wrong. Show me the stat for housing units per capita. Housing units per working age person is an all time high. Show me the stats for housing units per household. Hint, it's the same as the year 2000 and in line with historically normal levels. 1.1 housing units per household Show me the stat for rate of construction relative to population growth. Hint, it's at an all time high. Show me the demographic trends? Hint, it's towards flat or negative population growth, with most boomers dying over the next 10y, and each successive generation being smaller than the last. Where are your stats? Inventory, which has nothing to do with actual supply? What happened after the generationally low inventory of the 2000s? Anyone holding to that peg as confirmation of anything is in for a rude awakening
      - nostrademons 4y ago
        But those aren't the relevant stats. As another comment mentioned, newborns generally don't buy houses. The relevant stats are people reaching FTHB age (roughly 25-35), minus deaths, plus new construction. And that picture looks pretty bleak: https://countryeconomy.com/demography/population-structure/usa https://countryeconomy.com/demography/population-structure/u... There are about 45M Americans ages 25-35. There are about 21-22M Americans in peak die-off age (75+). There are about 1.2M annual housing starts: https://www.census.gov/construction/nrc/pdf/newresconst.pdf https://www.census.gov/construction/nrc/pdf/newresconst.pdf Sure, by 2035 or so, when baby boomers reach peak die-off age, we're going to have a housing bust. But over the next decade? Most Millennials are screwed, and it doesn't get better until today's middle-schoolers come of age.
        adam_arthur 4y ago
        What matters above all is number of households relative to housing units, and rate of expansion/contraction of households. Household growth was flat prepandemic https://fred.stlouisfed.org/series/TTLHH https://fred.stlouisfed.org/series/TTLHH The likely explanation for current RE market is households temporarily expanded due to the various stimulus and forbearances giving many higher disposable income, but we'll likely see this contract again as the effect of inflation takes hold. (Expanding/contracting can be through roommates splitting/joining, kids moving out etc). Housing is fungible. Rental units draw from buy demand and vice versa. Substitutable goods work this way on a macro scale. The millenials who buy, move out of rentals, which drives rents down (or less growth), increasing the spread between carrying cost to rent/own. There's a limit to how far this spread can widen nationally. You can't look at these markets independently. Number of households show the actual number of housing units demanded, everything else is an input to number of households.
        nostrademons 4y ago
        If housing is supply bound - which we know it is, because prices are rising - then rate of household growth is going to equal rate of new home construction, because you can't form those households until there's a house for them to move into. Which it does - compare your link with my census.gov link on new residential construction. Everyone who doesn't have a home has to double up with roommates or continue living with their parents If the question is "Can I maintain the same standard of living as I grew up with?" or "Can I form a family?" or "What are housing prices going to do now?", this isn't an interesting statistic. The number you want to know is "How many people would like to form households but can't because there are no houses to be had?" And that's what I'm citing with the demographic numbers. If there are twice as many people desiring houses as houses available for them, only half the population is going to get a home, and the price that the median home sells for will be what the 75th percentile of the income distribution can support.
epistasis 4y ago
But is there anything else that might have changed over the past two years thay might add some nuance to it? Such as massive shifts in where people want to live, how much space they want, etc. Looking just at the past two years ignores them past 14 years since the 2008 crisis, from which housing construction is just barely beginning to recover. And houses under construction is not completed house construction rate; each individual build is taking far longer because of supply chain issues, so it looks like there are far more houses in the pipeline, but there isn't actually an oversupply of housing by any means. If there was an oversupply, we'd see flatter prices, or maybe even declines. Housing prices are quite sticky, but we aren't seeing either massive vacancy rates or falling prices.
- adam_arthur 4y ago
  Inventory is not the same as structural supply. That's the big mistake many make, and inventory can very quickly accelerate back to a glut when conditions change (few months). There is an element of changing preferences, but city centers also up greatly in price. Can't be the whole story
  - notfbi 4y ago
    This research[1] estimates (15.1/23.8) 64% of the increases over pandemic period to remote work change, sounds like it could be a pretty big part of the story. [1] https://www.nber.org/papers/w30041 https://www.nber.org/papers/w30041
    - adam_arthur 4y ago
      You can't tie bay area or NYC price increases to remote work. You can tie LCOL price increases to them. But if that's the case, you would expect HCOL/central places to decline in price via the flip side of the same effect. Yet instead we see massive price increase in LCOL and smaller yet still big price increases in central/HCOL. Obviously a many variable system, but stating that remote work should lead to a national 20% increase in prices is nonsensical
monocasa 4y ago
Newborns aren't generally buying houses; the population was growing 25 years ago.
- adam_arthur 4y ago
  Housing units per working age person is at an all time high and increasing quickly. https://static.seekingalpha.com/uploads/2022/3/29/50377332-1648582470528738_origin.png https://static.seekingalpha.com/uploads/2022/3/29/50377332-1... On mobile now, but you can confirm the stats on FRED
  - HarryHirsch 4y ago
    Housing markets are regional. In my overpriced, overpopulated corner of Western MA construction simply isn't happening. The relevant metric isn't units per person, it's units per workplace. No one is interested if housing is plentiful in any deindustrialized rust belt city when people are moving to either coast. The person posting that graph has a bridge to sell
    - adam_arthur 4y ago
      Housing is fungible and substitutable. Especially in a WFH world. Ergo building in FL or TX can reduce prices in CA. Why do you think the northeast and CA are losing population?
      - HarryHirsch 4y ago
        If housing is fungible I've got a house in Gary, IN to sell to you. WFH makes it possible.
        adam_arthur 4y ago
        Do you understand macro scoped problems and the significance of subsets of the population having differing priorities? Seems not. Aside from the snark, I'll make it clear. If you have 100 people and even just 5 of them prioritize LCOL to their current locale, those 5 moving away will reduce demand for the area, regardless if the other 95 would never move to Gary, IN in a million years. Housing is not a closed system, and building nice developments in Raleigh or Denver will take population from higher COL places in the aggregate. Which is exactly why we see population loss in HCOL areas. Very small brained thinking in the residential real estate world unfortunately.
zamfi 4y ago
All of this is true, but...housing markets are extremely regional. In the SF Bay Area, for example, despite much more new construction, there is still not nearly enough housing being built to satisfy demand, and as a result prices are driven extremely high. In other parts of the US, there is much more housing supply and relatively low demand, making housing more affordable. Nationwide stats hide a lot of regional realities.
- deleted 4y ago
  [deleted]
- zeusk 4y ago
  I recently joined a real estate group, and the kinds of things I'm seeing there are beyond explanation. People have basically come to understanding that house prices only go up, they use exotic financing and stupid leverage (BRRR method) to keep buying "assets" and jacking up their rental yield which then re-prices the asset so they can take an even bigger loan to buy more "assets". Recently someone in the group asked how they could afford a house in Seattle and most answers resonated around buying houses in midwest/lcol areas and jacking up rent/renovating to take out further financing and keep buying properties till you can afford to buy a house in the hcol area. This has to end, with FED inflicting pain on the stupid leveraged folks. Homes should be for people to live in, not to purely speculate and grow their money.
  - heavyset_go 4y ago
    This is the same musical chairs of loans that the short term rental market uses.
  - zamfi 4y ago
    > Homes should be for people to live in, not to purely speculate and grow their money Wait, if those speculating investors have “rental yield” then doesn’t that imply people are living in those homes?
    - zeusk 4y ago
Dylan16807 4y ago
It's still a crisis, whether it's a shortage or not. Or more specifically, whether it's a shortage of reasonably available units vs. a shortage of existing units.
freework 4y ago
> the construction rate is all time high. Not in my area. Where I live, there are about 4 or 5 housing developments, and every time I drive by them, I never see any progress. Occasionally I may see one truck and maybe 3 or 4 people working, but most of the time, I see no one. In the year I've lived here, I have notices zero progress on all new construction that I know of.
deleted 4y ago
[deleted]

jelliclesfarm 4y ago

I don’t know why you are downvoted. You are right. Upvoted.

adam_arthur 4y ago
Yup, I can cite as needed when the angry comments show up. Too many with a vested belief in the narrative.
- epistasis 4y ago
  You are preventing an extremely selective and unrepresentative view of the stats.
  - adam_arthur 4y ago
    Prove me wrong. Show me the stat for housing units per capita. Housing units per working age person is an all time high. Show me the stats for housing units per household. Hint, it's the same as the year 2000 and in line with historically normal levels. 1.1 housing units per household Show me the stat for rate of construction relative to population growth. Hint, it's at an all time high. Show me the demographic trends? Hint, it's towards flat or negative population growth, with most boomers dying over the next 10y, and each successive generation being smaller than the last. Where are your stats? Inventory, which has nothing to do with actual supply? What happened after the generationally low inventory of the 2000s? Anyone holding to that peg as confirmation of anything is in for a rude awakening
    - nostrademons 4y ago
      But those aren't the relevant stats. As another comment mentioned, newborns generally don't buy houses. The relevant stats are people reaching FTHB age (roughly 25-35), minus deaths, plus new construction. And that picture looks pretty bleak: https://countryeconomy.com/demography/population-structure/usa https://countryeconomy.com/demography/population-structure/u... There are about 45M Americans ages 25-35. There are about 21-22M Americans in peak die-off age (75+). There are about 1.2M annual housing starts: https://www.census.gov/construction/nrc/pdf/newresconst.pdf https://www.census.gov/construction/nrc/pdf/newresconst.pdf Sure, by 2035 or so, when baby boomers reach peak die-off age, we're going to have a housing bust. But over the next decade? Most Millennials are screwed, and it doesn't get better until today's middle-schoolers come of age.
      - adam_arthur 4y ago
        What matters above all is number of households relative to housing units, and rate of expansion/contraction of households. Household growth was flat prepandemic https://fred.stlouisfed.org/series/TTLHH https://fred.stlouisfed.org/series/TTLHH The likely explanation for current RE market is households temporarily expanded due to the various stimulus and forbearances giving many higher disposable income, but we'll likely see this contract again as the effect of inflation takes hold. (Expanding/contracting can be through roommates splitting/joining, kids moving out etc). Housing is fungible. Rental units draw from buy demand and vice versa. Substitutable goods work this way on a macro scale. The millenials who buy, move out of rentals, which drives rents down (or less growth), increasing the spread between carrying cost to rent/own. There's a limit to how far this spread can widen nationally. You can't look at these markets independently. Number of households show the actual number of housing units demanded, everything else is an input to number of households.
        nostrademons 4y ago
        If housing is supply bound - which we know it is, because prices are rising - then rate of household growth is going to equal rate of new home construction, because you can't form those households until there's a house for them to move into. Which it does - compare your link with my census.gov link on new residential construction. Everyone who doesn't have a home has to double up with roommates or continue living with their parents If the question is "Can I maintain the same standard of living as I grew up with?" or "Can I form a family?" or "What are housing prices going to do now?", this isn't an interesting statistic. The number you want to know is "How many people would like to form households but can't because there are no houses to be had?" And that's what I'm citing with the demographic numbers. If there are twice as many people desiring houses as houses available for them, only half the population is going to get a home, and the price that the median home sells for will be what the 75th percentile of the income distribution can support.

epistasis 4y ago

But is there anything else that might have changed over the past two years thay might add some nuance to it? Such as massive shifts in where people want to live, how much space they want, etc. Looking just at the past two years ignores them past 14 years since the 2008 crisis, from which housing construction is just barely beginning to recover. And houses under construction is not completed house construction rate; each individual build is taking far longer because of supply chain issues, so it looks like there are far more houses in the pipeline, but there isn't actually an oversupply of housing by any means. If there was an oversupply, we'd see flatter prices, or maybe even declines. Housing prices are quite sticky, but we aren't seeing either massive vacancy rates or falling prices.

adam_arthur 4y ago
Inventory is not the same as structural supply. That's the big mistake many make, and inventory can very quickly accelerate back to a glut when conditions change (few months). There is an element of changing preferences, but city centers also up greatly in price. Can't be the whole story
- notfbi 4y ago
  This research[1] estimates (15.1/23.8) 64% of the increases over pandemic period to remote work change, sounds like it could be a pretty big part of the story. [1] https://www.nber.org/papers/w30041 https://www.nber.org/papers/w30041
  - adam_arthur 4y ago
    You can't tie bay area or NYC price increases to remote work. You can tie LCOL price increases to them. But if that's the case, you would expect HCOL/central places to decline in price via the flip side of the same effect. Yet instead we see massive price increase in LCOL and smaller yet still big price increases in central/HCOL. Obviously a many variable system, but stating that remote work should lead to a national 20% increase in prices is nonsensical

monocasa 4y ago

Newborns aren't generally buying houses; the population was growing 25 years ago.

adam_arthur 4y ago
Housing units per working age person is at an all time high and increasing quickly. https://static.seekingalpha.com/uploads/2022/3/29/50377332-1648582470528738_origin.png https://static.seekingalpha.com/uploads/2022/3/29/50377332-1... On mobile now, but you can confirm the stats on FRED
- HarryHirsch 4y ago
  Housing markets are regional. In my overpriced, overpopulated corner of Western MA construction simply isn't happening. The relevant metric isn't units per person, it's units per workplace. No one is interested if housing is plentiful in any deindustrialized rust belt city when people are moving to either coast. The person posting that graph has a bridge to sell
  - adam_arthur 4y ago
    Housing is fungible and substitutable. Especially in a WFH world. Ergo building in FL or TX can reduce prices in CA. Why do you think the northeast and CA are losing population?
    - HarryHirsch 4y ago
      If housing is fungible I've got a house in Gary, IN to sell to you. WFH makes it possible.
      - adam_arthur 4y ago
        Do you understand macro scoped problems and the significance of subsets of the population having differing priorities? Seems not. Aside from the snark, I'll make it clear. If you have 100 people and even just 5 of them prioritize LCOL to their current locale, those 5 moving away will reduce demand for the area, regardless if the other 95 would never move to Gary, IN in a million years. Housing is not a closed system, and building nice developments in Raleigh or Denver will take population from higher COL places in the aggregate. Which is exactly why we see population loss in HCOL areas. Very small brained thinking in the residential real estate world unfortunately.

zamfi 4y ago

All of this is true, but...housing markets are extremely regional. In the SF Bay Area, for example, despite much more new construction, there is still not nearly enough housing being built to satisfy demand, and as a result prices are driven extremely high. In other parts of the US, there is much more housing supply and relatively low demand, making housing more affordable. Nationwide stats hide a lot of regional realities.

deleted 4y ago
[deleted]
zeusk 4y ago
I recently joined a real estate group, and the kinds of things I'm seeing there are beyond explanation. People have basically come to understanding that house prices only go up, they use exotic financing and stupid leverage (BRRR method) to keep buying "assets" and jacking up their rental yield which then re-prices the asset so they can take an even bigger loan to buy more "assets". Recently someone in the group asked how they could afford a house in Seattle and most answers resonated around buying houses in midwest/lcol areas and jacking up rent/renovating to take out further financing and keep buying properties till you can afford to buy a house in the hcol area. This has to end, with FED inflicting pain on the stupid leveraged folks. Homes should be for people to live in, not to purely speculate and grow their money.
- heavyset_go 4y ago
  This is the same musical chairs of loans that the short term rental market uses.
- zamfi 4y ago
  > Homes should be for people to live in, not to purely speculate and grow their money Wait, if those speculating investors have “rental yield” then doesn’t that imply people are living in those homes?
  - zeusk 4y ago

Dylan16807 4y ago

It's still a crisis, whether it's a shortage or not. Or more specifically, whether it's a shortage of reasonably available units vs. a shortage of existing units.

freework 4y ago

> the construction rate is all time high. Not in my area. Where I live, there are about 4 or 5 housing developments, and every time I drive by them, I never see any progress. Occasionally I may see one truck and maybe 3 or 4 people working, but most of the time, I see no one. In the year I've lived here, I have notices zero progress on all new construction that I know of.

deleted 4y ago

[deleted]