A definition of shortage – any shortage – is lack of supply for the demand for the same thing. So, if more people want new cars than the available supply, there is a shortage of cars. While this statement is factual, there is another reality: the supply of cars – old and new – continues regardless of the demand.
In America there are 109 million cars registered (2019) for a population of 323 million. There are more operating automobiles than one third of the population in the USA. Consider most people under the age of 18 do not own a car, and people over 80 are most likely reducing vehicle ownership, then roughly 95 million people do not have a car. That means 230 million share 109 million vehicles, nearly 1 car for every two adults.
Clearly there is not a shortage of cars. Yet the press claims there is a shortage.
Part of the story unanalyzed is what is the number of NEW cars WANTED versus NEEDED. Another is why only NEW? The supply of late model cars is huge. It can be argued that the current shortage is temporary and subjective.
I maintain the same is true in housing. Just because people are staying in their homes rather than selling and buying another one, does not mean there is a shortage of housing. We continued to build new homes, condos, and apartments continually. Housing supply continues to grow. At any given moment there may be more people wanting to buy a different home than is currently available on the market. That does not compute to a housing shortage, merely a temporary weakness in the market.
Interestingly, the pandemic demonstrated that ‘work from home’ works for employers. Employees loved it as well. More personal time, less or no commuting expense, less wear and tear on the family car and wardrobes, all while productivity and innovation grew. Employers also witnessed a reduction of expense for office space, utilities, and maintenance. The work-from-home model may be here to stay. Or a hybrid of it.
That means more people can work from home and live wherever they desire. Living in a more rural environment is now practical and it is cheaper. With lessening the need for housing closer to place of employment, housing supply loosens up in what was a more in-demand market. So, it is more accurate to state housing markets are in flex while norms are changing to different work-place models.
If employers insist on a return to the office (not very likely), then employees have new options. They can become independent consultants and sell to more employers all while working from home. This is a win-win situation because families gain from more personal time while employers reduce their overhead costs for buildings and related expenses. Do we need to mention the added benefit of improved innovation and productivity? Really? Isn’t this the point of training and development? To make our workforce more productive and creative?
Imbalances in the housing market are a fluid reality. Such imbalances do not spell shortage.
I think the press needs to do a better job on explaining what they mean.
June 23, 2021