Another Big Defection from Team Housing Shortage
A trade org, no less, reluctantly breaks the news that supply-and-demand is, in fact, constrained by reality
the MBA regrets to inform you that the housing shortage has been cancelled
latest builder reports: “definitely no housing shortage here”
a Rorschach Test for cool-headed housing analysis
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(2) 💡 Find out more about Random Walk Idea Dinners. High-Signal Serendipity.MBA Says “There Is No Housing Shortage”
As longer-term readers know, the wrongest thing that the most people believe to be true is that there is a “housing shortage.”
There is no housing shortage.1 If anything, there is a moderate housing surplus. That’s what the data shows, it’s what common sense would predict, and it’s what all the large homebuilders are screaming at the top of their lungs.
Nevertheless, defections from Team Shortage are rare, but they do happen, and the latest to declare “so, actually, about that shortage . . .” is probably the highest-profile defector to date: The Mortgage Bankers Association.
The MBA published a report on housing supply/demand dynamics, and they did not bury the lede, even if they soft-pedaled it, ever so slightly:
We argue that the post-financial crisis narrative of a persistent housing shortage may no longer accurately describe market conditions over the decades ahead.
Query whether it ever accurately described market conditions, except perhaps for a brief moment following the GFC, but the MBA is quite clear that the housing shortage has been cancelled.
Why? It’s a combination of demographics, immigration flows, and household formation, but the tl;dr is that the stork is no longer on our side, and the young ‘uns have abandoned any semblance of adult milestones, making demand soft-to-softer.
Household growth is slowing beyond the previous decades (even in the high-immigration scenario, eventually):
Fewer new households need fewer new roofs overhead.
All projections are hand-wavy, but compare the estimated net-new demand, with the estimated net-new supply:
Demand:
Supply:
11,340 new units needed is smaller than 12,651 units delivered, if I’m doing the math right.
We estimate a growth in supply of between 10.6 million and 14.6 million units from 2026 to 2035 . . . our estimated change in demand from 2026 to 2035 falls between the low estimate and the series average estimate.
This suggests that the growth in supply could exceed the growth in demand by 2035 depending on the trajectory of supply. This relationship holds through 2045, all else equal.
Yes, it appears I did the math right. “Supply could exceed the growth in demand by 2035.”
The MBA is an industry trade group with a lot of incentive to be strongly Team Shortage. Kudos to them for keeping it real.
ICYMI
Another builder says “definitely no shortage”
The truth is, supply likely exceeds demand, right now.
