Shrinking housing supply presents problems locally and nationally
For more than a year, leaders of the Greater Las Vegas Association of Realtors have been talking about how the local housing supply has been shrinking. For months, GLVAR has been reporting a three-month supply of existing homes available for sale without any sort of offer on them.
Then, in March, GLVAR announced that the local housing supply had shrunk to a two-month supply. The housing supply got even tighter in April.
GLVAR President David J. Tina said that’s troubling, since a six-month supply is a balanced housing market.
While it might be more pronounced here in Nevada, Tina said this shrinking housing supply isn’t just a local issue. As documented in a recent newsletter article published by the Nevada Association of Realtors, this is a growing concern nationally.
The state association’s article quoted Lawrence Yun, chief economist of the National Association of Realtors, who sounded the alarm while speaking April 20 at the Region XI Realtor Conference in Colorado Springs.
Yun said the biggest contributor to what has become a national housing shortage is that homebuilders are not keeping up with demand. He cited several key reasons for this.
“On ‘spec homes,’ builders can find a buyer in less than three months,” Yun said. “So why aren’t the builders contributing more to the marketplace? There are not enough lots ready for construction. There is a shortage of quality labor.”
He also cited “lending hurdles,” saying “fewer community banks are lending to homebuilders, and lastly, lumber prices are rising.”
According to Yun, the number of new home starts has fallen below the national average for eight straight years. He said that will translate into a continued inventory shortage for the rest of 2017 and probably into 2018.
While the best way to relieve the shortage is to build more homes, he said a second possibility is for investors to start unloading homes they picked up on the cheap during the recession.
“Ignore the data about homebuilder confidence,” Yun added. “Small homebuilders are stifled, and they aren’t the ones filling out the surveys. Just look at housing starts; that is the true indicator. If we get more domestic workers going into construction and wages grow, that could help, but it will take time.”
So, what happens when fewer Americans buy homes?
“If you become a population of renters, then voting habits change,” Yun said, further explaining that a public outcry for sweeping rent control policies could ensue.
During the housing binge a decade ago, Yun said homebuilding was driven by both large corporations and small independent builders. But that’s no longer the case. Yun said tougher regulations from Dodd-Frank legislation have handcuffed community banks, which has led to fewer loans going to smaller builders.
Nationally, home prices have outpaced income during the past five years. Specifically, home prices have risen 40 percent in that span while income has jumped only 11 percent. And yet, the demand for housing remains high.
It’s no wonder the homeownership rate is at a 50-year low.
Tina expects demand to stay strong in Southern Nevada, with the population growing by more than 2 percent per year and the economy continuing to gain ground.
At this rate, he said, even fewer homes might be available for sale as high-profile projects like a new resort on the Strip and a proposed new football stadium for UNLV and the soon-to-be Las Vegas Raiders come on line.
Yun wrapped up his presentation with some positives. As with the local research recently conducted by GLVAR and Nevada Association of Realtors, Yun said Americans are increasingly optimistic, noting consumers are more confident after last fall’s election.
Likewise, Tina pointed to plenty of positives in Southern Nevada. Despite the tight housing supply, GLVAR’s latest housing statistics show more homes are selling so far this year than last year and at median prices nearly 13 percent higher than where they were last year.
“Let’s just hope we can keep finding homes for people to buy,” Tina said.
GLVAR was founded in 1947 and provides its nearly 13,000 local members with education, training and political representation. The local representative of the National Association of Realtors, GLVAR is the largest professional organization in Southern Nevada. Each GLVAR member receives the highest level of professional training and must abide by a strict code of ethics. For more information, visit LasVegasRealtor.com. Email your real estate questions to communications@glvar.org.