While many predictions indicate that home prices will drop next year as home sales stall, one expert predicts that housing will continue to be out of reach for many prospective purchasers.
What Happened: Marc Norman, associate dean at the NYU Schack Institute of Real Estate said, "We have a supply problem with housing — We'll see the price declines, but I think the income gains that we are seeing lately are still not keeping up with the prices that we are seeing in the market; in most markets."
Redfin data shows a 22% decrease in new house listings for December, a reduction of approximately 2,000 properties for sale year-over-year.
"We're in a place where the housing can't keep up with the demand," Norman said.
Read also: Here's Where Morgan Stanley Bets The Housing Market Goes In 2023
According to Norman, one factor contributing to the housing shortage dates back more than ten years.
"We, for the last 20 years, have underbuilt the housing," Norman said. "In 2008, we saw the sort of demand go down, but it never came back in terms of supply."
Residential construction activity in the private sector never returned to 2006 levels after the real estate meltdown of 2008.
Why It Matters: According to data from the Census Bureau and the Department of Housing and Urban Development, home building projects remained far below early 2000 levels for the past ten years despite a gradual year-over-year growth.
In order to improve supply, some states and local governments are loosening construction regulations, and some homebuilders are providing incentives to purchasers like special financing or a price discount to sell homes that are backlogged.
For example, Stuart Miller, executive chairman of Lennar Corp, explained the company adjusted the price of new home sales and homes in the backlog to help promote deliveries.
"Our sales volume and pricing have clearly been impacted by rising interest rates, but there remains a significant national shortage of housing, especially workforce housing, and there is still demand as we navigate the rebalance between price and interest rates," Miller said.
Even while the supply side is tight, there are ways to earn money in the housing market. Check out how you can invest as little as $100 in a rental property to earn passive income and build wealth over the long term.
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