Where Are All The Houses Hiding?
Are you looking to buy a new house but feel like you’re playing a game of hide and go seek? In this episode of We Know Henderson, I’m going to talk about several of the factors that are leading to our current inventory shortage. I’ll also explain the cure to this supply and demand issue—which may not be what you think it is.
Home Hide And Seek
Do you love a great game of hide and go seek? That’s exactly what we're playing in the real estate market right now. Where are all the houses hiding?
Many people think that there's low inventory because people just aren't selling their houses. But if they sell their house, they need somewhere to go. It becomes like the old kids game of musical chairs, where everybody runs around when the music comes on and have to sit down when it stops. The person that wasn't sitting lost.
Similarly, if you have everybody list their homes for sale, they need somewhere else to go. It’s then going to be musical homes, and we don't want to leave people homeless.
Why The Housing Shortage?
Several factors are leading to this inventory shortage where we just can't find homes. In the four decades before the last 10 years, we built over 25 million homes in each decade. In the last 10 years from 2010 to 2020, we've only built 5.8 million homes. The old crash of 2008 still haunts us and the builders as well. They have started to build a lot more recently; however, the work has not caught up with the deficit.
While 5.8 million homes seem like a lot, we need to put it into context. Our population is growing. In the last 10 years, from 2010 until 2020, the population has grown from 39 million to well over 330 million. That’s a 22 million person gain, with the average household having 2.53 people as residents. That gives us a need for 8.7 million homes—but we've only built 5.8 million.
This 3 million home deficit makes the housing shortage easier to understand. However, that also doesn’t account for homes that we've lost natural disasters like tornadoes, hurricanes, floods, and fires. That means we actually need even more.
Another reason for the housing shortage is migration from states to other states. In certain places like Las Vegas and Henderson, there's a massive inflow of people and we just don't have the homes. Some areas have older dilapidated homes, vacancies, and other factors. As cities grow and grow out, a lot of people move out to the outskirts and suburbs within those cities.
For instance, right here in Henderson you could drive down streets like Eastern, Water, and other areas and find that there are homes that have been converted into insurance agencies, hair salons, and antique shops. These once homes are now businesses.
Lastly, a factor that's important to mention is the number of millennials and Gen Z that have stayed at home longer than some of the generations before. These groups are now starting to move out at a much more rapid pace because they're getting to that age where they've got their significant others, whether girlfriends, boyfriends, wives, or husbands. As a result, we're fracturing households where one becomes two or three or four.
We also have a lot more situations where there are roommates, with three, four, or five people go in and rent or buy a house together. As life changes occur, from marriages and domestic partnerships to babies, more households get fractured as well. As this continues to develop, we need more homes.
Solving The Supply Demand
With 5.8 million homes being built in the last decade, you can see why we are short over 3 million homes. If you're thinking that the market is going to crash, by the way, watch my last video about the market crashing to better understand what is actually happening with the market.
You need to understand that there is a supply-demand issue here that we're not solving by having people not shop for or list homes. We have a supply-demand issue because we simply need more supply. Therefore, it’s going to be a little while before the ride that we're on stops.
We may see a plateau, or we may even see certain corrections happen. For example, interest rates could go up, causing people to decide to stay in a roommate situation or at their parents' home a little bit longer. However, the need is still there. When you start putting all these pieces together, you can see why the market is the way it is right now.
If you have any questions about the local market here in Henderson or the Greater Las Vegas area, please reach out to me and I’d be happy to help you with any questions you may have. You can also subscribe to my channel so you never miss an episode of We Know Henderson, where I share everything from real estate tips to local restaurant reviews. Stay tuned to see what I feature next!