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Right now, with all the demand for housing, property developers are on a MISSION to build homes as quickly as they possibly can…but, there’s a problem: they can’t keep up with demand…because they don’t have enough materials to build from. In the last year, LUMBER PRICES have gone up a whopping 200%.
Some analysis’s are actually calling for this to be the NEXT housing crisis…but, instead of it being caused by a wave of mortgage defaults on nonperforming loans…it’s caused by a lack of lumber, increasing the COST to build a new home by an average of $24,000.
To make matters worse, constraints in supply chains make it nearly impossible to produce the amount of materials needed to keep up with demand – meaning, at least in the short term, housing could remain unusually high – and the increase cost of building winds up being passed on to you, as the customer, in the form of a higher list price.
There is also a new proposal aimed at curbing the housing shortage within the infrastructure package: The plan would look to eliminate zoning and land use policies, which include minimum lot sizes, mandatory parking requirements, and prohibitions of multifamily housing. In its place, the zoning requirements would be restructured in a way that would reflect the current housing shortage, and the NEED to build more real estate in areas which would’ve otherwise have been off limits.
I THINK easing up on zoning CAN be a good thing for cities experiencing a housing shortage, and I do think we need to update the zoning requirement to account for the present day reality that not everyone needs a car parked on site…and that would HELP. BUT, as far as how this is written, unfortunately, it might not be enough.
Since this infrastructure plan would take place over 10 years, that probably won’t give any immediate relief to the housing market. And also – BECAUSE this gives a tax incentive…wealthier cities, who have the biggest housing shortage to begin with, have very little reason to actually go for it, because THEY don’t need the money to begin with.
So, in short…from my perspective, the whole plan has some good intentions, but ultimately…it might not have as much of an impact on the housing market as expected….
AND REALLY…At the end of the day…the housing market doesn’t really appear to show any immediate signs of slowing down. Interest rates are estimated to stay low for another 2 years, it could take 18 months or longer for building materials to come down in price, and until then – there’s still a housing shortage.
Obviously, these conditions can’t last forever – and when there’s such an imbalance between the number of buyers in the market and the number of homes for sale, EVENTUALLY – the tides will change. But, until then, if you’re in the market for a home – be patient, and only purchase a property that you intend on keeping for at least 5-10 years. That way, IF the market goes down – it won’t have an immediate impact on you – because, at this point – anything can happen. Rising interest rates, more inventory, and any change in policy COULD have an effect on housing – but, in the short term, if everything stays relatively the same – housing could very well continue going up.
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