At the 2021 Urban Land Institute (ULI) Housing Opportunity Conference, chief economist with Zonda Ali Wolf, spoke about how the current acceleration in the housing market could be impacted by the housing shortage.
The conference hosted by the ULI is meant to help bring together experts in real estate and land use to share their expertise and give insight into the status of the built environment.
According to Wolf, the housing market is currently experiencing an influx of potential buyers, from all different stages of life, thanks to the want for bigger living space that the pandemic caused.
As quoted in an article by Brett Widness by the Urban Land Institute, “We are in a K-shaped recovery,” Wolf said. “Certain people and certain businesses have a higher net worth and higher profitability than they did this time last year. Housing being one of those [businesses] in the top half of the K, and our homebuyers falling in that part as well.”
Along the bottom of the K-shaped economy are industries like entertainment (concerts, theaters), tourism, conferences, and other service industries. However, while the housing is an unexpected bright spot, the challenges surrounding it could decelerate the growth.
One of the most obvious challenges is the massive unemployment the nation experienced as a result of the pandemic.
According to the article, Wolf “highlighted that Las Vegas, Detroit, and Los Angeles had an implied unemployment rate of more than 10 percent as recently as January 2021, while Salt Lake City and Indianapolis had the lowest implied unemployment rates in the United States at below 4.5%.”
While recent reports are showing that jobs are increasing in certain sectors, the percentage of unemployed workers is still high.
The biggest challenge within the industry is the shortage of available houses, which is driving up prices, limiting accessibility and affordability.
Wolf “highlighted that listings in markets such as Riverside-San Bernardino and Raleigh are down 60 to 70 percent year over year. Pricing has also responded to the lack of supply with markets such as Cleveland, Ohio, seeing prices up more than 9 percent year over year,’ according to the article by Widness.
The shortage of inventory is caused by numerous things including rising lumber prices.
To manage delivery, inventory and cost issues, builders may resort to limiting sales and construction, which would have an adverse affect on home sale numbers and construction rates and decelerate the housing market.
Wolf ended by saying that, as prices go back to normal in various sectors over the rest of the year, inflation numbers could “alarming.”