Great News in the Real Estate Market Home Builders are Ramping Up! 1

The obvious, only, and often overlooked solution to the "affordability crisis" is building more housing stock, and that's finally starting to happen. Is the market ready for more housing? Isn't there a risk of a crash still?

Well, let's review the market data first to understand to understand where we are.

In economics, the market is a result of the relationship of two factors: Supply and Demand. In real estate, supply is measured as the number of homes for sale as a portion of the money sales figures or months of inventory, and the demand side is primarily affected by interest rates.

So, on the demand side, mortgage rates again have remained below 7% thus far the entire month of June, after spending the end of May above the 7% level. This reflects a reduction in tension in the market.

Inventory continues at record lows for periods other than during the pandemic and has declined below the rates of 2021. As I have repeatedly said, as long as inventory is low, prices cannot go down much.

Locally, in Los Angeles, the market grew slightly in the direction of a seller's market to a market action index of 44, about the same as last month.

This week we have not one but two subscription services that really have headlines that are misleading, so I'll save you from paying for the information.

The 1st is from Housing Wire, with their headline "Inventory gets summer lift."

That sounds good, inventory got a lift, so that would mean that there is a meaningful increase in the number of homes to choose from? Well, not really. Their graph shows at best a microscopic improvement, still at historically low levels when compared to the pre-COVID market and anything but the bottom of the adjustments during that global pandemic.

When you look at the data from the National Association of Realtors, you see just how anemic the number of homes for sale is. Keep in mind, on this graph, the number of homes for sale is a fraction of the inventory from 1984, when our population was 50% smaller than it is today1

Another service that charges for its market data is Inman, and this week their stinker of an article has the headline "The housing downturn was supposed to bring the market back into balance between buyers and sellers. But recent inventory gains have stalled."

The minor point the is wrong is that recent inventory gains have stalled. They have continued to gain, they are just not any where near to historic levels. But more, this headline is a regular piece of nonsense in the real estate industry that focuses on "the imbalance" between buyers and sellers. In fact, the market is always balanced, perfectly. For every house that sells, the is a buyer and a seller. There are other interested buyers, buyers that either did not want the property as much or did not execute a plan to get the property, but in the end there are always both a buyer and seller.

OK, how about some good news! 

For all the talk about an "affordability crisis" and a housing crisis," the obvious solution, building more homes, is rarely ever discussed by policymakers. In truth, at least in California, our politicians have decided to stop building new homes to force more people into less space, but they just cannot say that out loud.

Good news is the market is building pressure. Here is an article in Fortune Magazine citing a survey that  Over 80% of Americans support building more homes in their local neighborhood.
                            
And, in response to the demand, the free market is pushing a solution by building more homes. Redfin reports that builders built more homes last month than in any month in two decades.

If both prospective home buyers and professionals in real estate work together, more homes can be built which would lessen the upward pressure on prices and create more opportunities for new buyers.
--
Bill Gross, The LAProbate Expert
I am a real estate broker in Los Angeles, CA focused on probate real estate and the leader of a team of over 1,100 agents nationally probate experts.

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