The Housing Shortage
I live in an old neighborhood in Las Vegas called Paradise Palms. Most of the houses in my development were built in the early 1960s and were designed in mid-century model style, When we moved here in 2003 the neighborhood was old and run down. Some of the homes still owned by the original owner remained intact. But most of the area was shabby and rundown, only showing slight glimmers of gentrification in spots where industrious people were fixing them up and making them unique and unusual. I think many of them, like myself, were suburban pioneers, fleeing the doldrums of the cookie-cutter home which had become stock and trade across the Las Vegas community during the boom times. The first home I bought in Vegas was in 1993. It was nice and spacious on the inside, but again, it was ‘houses made of ticky-tack,’ squeezed side by side with 30 other houses on a block. Too many nosy neighbors and not enough privacy.
When the housing crash came in 2007–2008 there was a mass exodus of homeowners who were underwater on equity and could no longer afford or see the point of remaining in their homes. So, people walked away and defaulted on their mortgages. A few years later after the dust began to settle, a new generation of buyers came into the fray snatching up homes at a fraction of their pre-crash market value. My development, which sat like a ghost town for many years, suddenly began to see lots of action. It was exciting to see homes that were sitting dormant for years coming back to life through the efforts of this new wave of homebuyers, most of them young and willing to put the money and effort into fixing up these older homes.
Now, in 2022, Las Vegas, like many other cities, is suffering from a low housing inventory. It’s one big reason why houses in my neighborhood, especially the ones that have been properly renovated are in high demand.
There is a home at the end of my cul-de-sac where an older woman once lived. She was well into her late eighties when her children placed her in assisted living. She died recently and her children, who had been renting the home for years decided it was time to sell and they put the home on the market. Today, around late morning, I looked out the window and saw the cul-de-sac filled with cars. Between 11:00 AM to 2:00 PM at least a hundred people came to view this house which has been on the market for less than a week. It won’t be long before it sells. It amazes me that my neighborhood which was in a long decline, and forgotten by most homebuyers for years, has made such a miraculous comeback — the demand boosted by the housing shortage.
What are the factors that caused the housing shortage? The big one is the high cost of building materials and supply chain disruptions. Builders are afraid to take risks at building multiple units as the dilemma may worsen. They may not be able to deliver on time or stick to a price agreed upon at the time of signing. This is one of the main reasons for the low housing supply. There are more issues, but that is the main one.
In the early 2000s, home builders were able to keep up with the population growth. At that time they were erected around 20,000 homes a year which was sufficient. Then the boom came and almost 40,000 houses a year were being thrown up, and that was too many creating a glut that finally helped burst the happy bubble everyone was living under.
And when 2008, brought in the Great Recession, a time when you couldn’t give a house away. They were building less than 10,000 homes a year while the town was still growing, falling off the pace of demand for new housing. For years builders cut back, and the housing market was way out of kilter for the newcomers that had to be served.
Now Las Vegas is nearly 120,00 homes short of demand. There has been a huge rise in apartment construction, but it comes at a time when people, young people especially, want to buy a home.
Housing prices continue to rise at a time when you have a surge of people from out of state who are choosing Las Vegas as their new destination. Who knows what will happen? Things could get better or worse. The only thing you really know in real estate is that things will change. As long as builders keep building and people keep buying houses we can only hope that at some point things will level out and inventory will go back to normal.
Since I saw all those cars on my street this morning I couldn’t stop thinking about what price I could get for my house. But where would I go? I’ll wait for another day to ponder that. A high rise in Miami may be nice.