2 minute readSometimes the challenge we’d rather have than its opposite is actually that opposite challenge in disguise.
Put another way, homebuilders, any day, would rather deal with a pressure-cooker of demand they’re having problems keeping up with, than to have plenty of capacity to meet demand squeezed down to a trickle.
These seem like either-or conditions. But life and the dismal science of economics are messier than that. Sometimes not meeting demand increases the odds of that demand funneling – from frustration, from shifting household Currently there are 799 thousand single family units under construction (SA). This is the highest level since December 2006. For single family, many of these homes are already sold (Census counts sales when contract is signed). The reason there are so many homes is probably due to construction delays. Since many of these are already sold, it is unlikely this is “overbuilding”, or that this will impact prices (although the buyers will be moving out of their current home or apartment once these homes are completed). Blue is for 2+ units. Currently there are 784 thousand multi-family units under construction. This is the highest level since June 1974! For multi-family, construction delays are probably also a factor. The completion of these units should help with rent pressure. Combined, there are 1.583 million units under construction. This is the most since August 1973. The inflection point – where the [low inventory-high demand] problem homebuilders would rather have tips into the problem they’d really rather not encounter [inventory vs. weak demand] – may be camouflaged in the funnel storm of tailwinds and headwinds. Maybe not. As soon as we hear “soft landing,” however, we flinch. In the wake of the Federal Reserve’s first hike of its federal funds rates, NAHB chief economist Dietz notes: Given this expected path of monetary policy, we reiterate our policy recommendation with respect to a soft landing. Clearly, elevated inflation readings call for a normalization of monetary policy, particularly as the economy moves beyond Covid-related impacts. However, fiscal and regulatory must complement monetary policy as part of this adjustment. Higher inflation in housing is due to a lack of rental and for-sale inventory and cost growth for building material, lots and labor. Higher interest rates will not produce more lumber. A smaller balance sheet will not increase the production of appliances and materials. In short, while the Fed can cool the demand-side of the economy, additional output on the supply-side is required in order to tame the growth in costs that we see in housing and other sectors of the economy. And efficient regulatory policy in particular can help achieve this goal. The big take-away here is, the good problem to have is the problem you can resolve to solve. Winners in today’s tough and uncertain markets will be the ones that put time on their side, while everybody else battles against its relentless pitch forward.Join the conversation
![Image: Courtesy of Calculated Risk Currently there are 799 thousand single family units under construction (SA). This is the highest level since December 2006. For single family, many of these homes are already sold (Census counts sales when contract is signed). The reason there are so many homes is probably due to construction delays. Since many of these are already sold, it is unlikely this is “overbuilding”, or that this will impact prices (although the buyers will be moving out of their current home or apartment once these homes are completed). Blue is for 2+ units. Currently there are 784 thousand multi-family units under construction. This is the highest level since June 1974! For multi-family, construction delays are probably also a factor. The completion of these units should help with rent pressure. Combined, there are 1.583 million units under construction. This is the most since August 1973. The inflection point – where the [low inventory-high demand] problem homebuilders would rather have tips into the problem they’d really rather not encounter [inventory vs. weak demand] – may be camouflaged in the funnel storm of tailwinds and headwinds. Maybe not. As soon as we hear “soft landing,” however, we flinch. In the wake of the Federal Reserve’s first hike of its federal funds rates, NAHB chief economist Dietz notes: Given this expected path of monetary policy, we reiterate our policy recommendation with respect to a soft landing. Clearly, elevated inflation readings call for a normalization of monetary policy, particularly as the economy moves beyond Covid-related impacts. However, fiscal and regulatory must complement monetary policy as part of this adjustment. Higher inflation in housing is due to a lack of rental and for-sale inventory and cost growth for building material, lots and labor. Higher interest rates will not produce more lumber. A smaller balance sheet will not increase the production of appliances and materials. In short, while the Fed can cool the demand-side of the economy, additional output on the supply-side is required in order to tame the growth in costs that we see in housing and other sectors of the economy. And efficient regulatory policy in particular can help achieve this goal. The big take-away here is, the good problem to have is the problem you can resolve to solve. Winners in today’s tough and uncertain markets will be the ones that put time on their side, while everybody else battles against its relentless pitch forward. Join the conversation](https://develop.housingwire.com/wp-content/uploads/2022/03/image-8.png 1018w){kind=link}