Will The New Construction Bottleneck Cause A New Housing Bubble?

Will The New Construction Bottleneck Cause A New Housing Bubble?

The US has reached a new record for the number of homes under construction.

About 20% more homes are being built today than when the housing bubble was forming back in 2006, and there is no sign that the new construction pipeline will reverse any time soon.

Perhaps the most significant housing market fears being hyped on social media concern the flood of new homes that will hit the market when construction is completed. These reports declare that inventories will be soaring while home prices crash. I've seen numerous reports calling for as much as a 50% price correction due to the decline in demand and rise in inventory.

Rather than take these unsupported prophecies as fact, why not follow the data and see where it leads us?

Before we get to the analysis, I have included a list of all new construction homes in Florida's Big Bend so that our readers can see what's available today (including this incredible find on Florida's Forgotten Coast).

New Construction Homes For Sale In Florida's Big Bend

351 Properties
Page 1 of 30

Today's US housing market is rife with rumors and speculation unlike any other I have ever seen. I've been selling homes in Tallahassee for over 31 years, but this is the first major market swing during social-media-fueled full-community involvement.

It seems that everybody has an opinion. Unfortunately, for many people who believe what they are fed on Twitter, Facebook, Instagram, and YouTube, the not-so-silent majority leads them astray with half-truths and full-out lies. Sensationalism is the theme of the day, and, as they say, if it bleeds, it reads," so don't be so quick to make a decision based upon the social media consensus.

Today’s observations evolved from an article by Kevin Erdmann, a gentleman who has written two books on the housing market and has the top real estate newsletter I am aware of. He offers both a free version and a paid version of his newsletter, and I recommend anybody with a stake in the housing market to subscribe to either version

Let's look at four graphs that provide insight into the current record-setting pipeline of new construction homes under construction in America.

Can Builders Save The Housing Market?
Home Affordability Crisis: Local Solutions ~ National Issue: Delving deep into current US homebuilder production. Enough? Short? A less optimistic real estate market outlook.
The Unaffordable Housing Paradox: Why Homes Are Out of Reach
The affordable housing shortage has this solution. It requires changes in urban planning that pay attention to housing costs and housing economics.
Are Home Prices Heading for a Crash?
The US housing market has been a frequent topic in the news, but a crucial factor is being ignored when determining the direction of US home prices.
The Fallacy of Affordable Housing: The Need for More Homes
The idea of affordable housing is noble, but the reality is that building new low-end homes is not the solution to the housing crisis we're facing.
Foreclosure Crisis: What the Data Tells Us
Are you curious about what's really going on with foreclosures and loans in forbearance? Worried about the next housing crash?
Are you a NIMBY or a YIMBY?
Two terms have gained prominence over the past few years. NIMBY (Not In My Back Yard) and YIMBY (Yes, In My Back Yard) are labels that classify housing market activists into one of two camps
How Often Do Home Prices Fall?
Are home prices falling? Will house prices fall soon? Home prices are soaring, buyers are having to pay above most sellers' asking prices, and the housing market feels just like a feeding frenzy during Shark Week on the Discovery Channel.
Home Affordability Falls To 40-Year Low!
It's been over forty years since homes were more expensive than today when you factor in inflation, home prices, and mortgage interest rates.
The Surprising Way Interest Rates Move The Market
When mortgage interest rates change, housing market experts surface and make bold claims on how the market will unfold. They are usually wrong!
Real Story Behind Home Prices: Fact Versus Fiction
When it comes to buying a home, many misconceptions about the housing market can cause confusion and uncertainty for potential homebuyers. One of the most persistent myths is that home prices fall frequently, but is this true?
Biden Rent Control Plan
The White House announced an executive action that Biden says is designed to "protect renters and promote rental affordability," but I cannot imagine a worse response from our Commander In Chief to confront the nation's housing and rental affordability crisis
Big Redfin Report: First Time Redfin Saw THIS Since 2012!
Recent housing market data from Redfin, the large online real estate portal, shows that something occurred over the past two months that has not happened in the past ten years.
Will Assumable Mortgages Save Housing?
Will assumable mortgages save housing? Home affordability is becoming one of the hottest topics in the economy, but I was recently asked if assumable mortgages might bring some relief to homebuyers. This video shares what I think about how mortgage assumption will impact housing.
Why Vacancy Rates Are the Hidden Indicator of Housing Market Health
Imagine shopping for a new home—whether you're aiming to buy or rent—and finding that every other house on the block is empty. Conversely, imagine a tight market where you can't even find a rental property, let alone purchase a home.
Renter Nation Says Goodbye To The American Dream!
It's the beginning of a generational shift in the housing market that will greatly reduce homeownership and push the US towards becoming a renter nation, one in which Wall Street is in control of both home prices and rents
The Truth About Foreclosures - Mortgage Pipeline Update
The best way to start to analyze the potential for mass foreclosures is to break down the current mortgage pipeline to observe forming trends.
Will NINJA Loans Bring Down The Housing Market?
Housing Crash Coming? If you remember back to the housing bubble, we saw the growth of "NINJA" loans, as they were a segment of the home sales explosion.
Google Knows. The Surprising Real Estate Market Forecast You Won't Believe!
Is it possible to forecast home sales in the US housing market with a search on Google? I had this thought about Google and a google housing market forecast as I was reexamining our search engine optimization efforts.
Economic Outlook For The Housing Market
Joe Manausa gives an update on the economic outlook for Tallahassee and the US housing market. Includes housing market forecast, housing market activity, and new construction analysis, and reveals how Tallahassee compares with the overall US housing market.
Will New Construction Bottleneck Cause A New Housing Bubble?
Are you concerned that the bottleneck of builder homes under construction will cause a new housing bubble as they are finally completed?
6 Housing Market Rumors Debunked (1 Confirmed)
7 different housing market rumors are perpetuated as “FACT” in various forms of "hype." Discussion of this "housing market news" has been ongoing for years, so today, I want to put them all to rest.
Who To Blame For Soaring Home Prices
There is a huge shortage of homes in the US, and there is only one culprit to blame, and I’m going to tell you who it is!
What You Don't Know About Home Prices!
Home prices are gaining traction as topics in both the mainstream media and social media, but there are three common misconceptions about the change in house prices that are unanimously reported as unquestionably true.
Is The Supply Of Homes For Sale Finally Rising?
Is The Supply Of Homes For Sale Finally Rising? Is the US housing market heading for a crash? Will home prices fall? Follow the metrics that clearly show what to expect from home prices and the supply of homes for sale in 2022 and beyond.
Zillow Exposes Mainstream Media On Home Prices
Zillow serves up the data that exposes the poor reporting of the mainstream media on Zillow home prices and that conditions are not what they seem.
House Prices - Inflation Adjusted Home Prices
Just How High Are Today's House Prices? The price of houses in the US has risen to a toxic level, and many are wondering how they will be able to afford to live in their local communities
Podcast: Housing Myths Dispelled
Home Building Hero David Belman and Joe Manausa discuss many of the "myths" that have been published in the media about the housing market.
USA Today Misleads Readers About Home Prices
USA Today Misleads Readers About Home Prices - Median Home Price: The USA Today Network has been misleading readers, using the median home price change suggesting that houses are getting cheaper and a real estate crash is upon us. Is this poor journalism or is there something more to it?
Are We Overbuilding Again?
I've been asked recently for my opinion on the number of homes being built in the US. Specifically, people are wondering if the ghost of 2006 has come back to bring more homes to the market than what can be consumed?
Housing - Do You Follow Your Gut (Or Analytics) In Housing?
I think the signs in the housing market are loud and clear, yet most real estate reports I read or view are missing the most critical factor in housing today.
Home Ownership Is Radically Different For Millennials
This is a simple millennial housing case study that will clearly show that the millennials will face a housing market like no other generation going back to post-World War II.
When Will Home Prices Fall?
Are Home Values About To Crash AGAIN? Now that we've seen about three years' worth of skyrocketing home prices, prudent buyers with memories are asking when home prices are going to start falling again.

Homes Under Construction In The US

When you go onto YouTube and see video titles calling for a 50% price correction in housing, it is often "supported" by the following information about the current number of new privately-owned housing units under construction.

New privately-owned housing units under construction January 2023

This graph clearly shows that the pipeline is at an all-time high (20% higher than in January 2006), and the trend is still moving higher. Many people are concerned about what will happen when all these homes hit the market.

There are two hugely important factors when considering the abundant pipeline revealed in this graph. First, the pipeline is larger because it is taking longer to build homes today due to supply chain disruptions, and second, most homes are selling before or as they are completed.

We will know an over-supply problem is mounting when the months of supply of completed homes begin to rise rapidly.

Current Supply Of New Construction Homes

This graph plots the median months of supply of new construction homes in the US.

Graph of new homes median months supply January 2023

The number of finished "ready to buy and occupy" new construction homes is near an all-time low at fewer than two months of supply. This is diametrically different from a growing inventory of homes.

As I explained in a previous report (which you see around the 7:20 - 8:00 mark in the video below), the current pipeline of new homes being built is taking nearly 50% longer to shed new homes; thus, the pipeline can be 50% larger without it producing homes at a faster rate. 

Scale & Relativity Required In Record-Setting Years

The following graph was inspired by a recent post by Erdmann, who warned that any "record number" has to be scaled with the size of the country over time. So, for example, a half-million more units in our country today, with 142 million existing units, is a lot different than a half-million more units in our country fifty years ago, with 76 million units.

Total housing units under construction compared to overall US population January 2023

In the graph above, we have plotted the new construction pipeline relative to the US population over the years. The blue line plots the vacant units for rent (compared to the population size). For example, at the far left of the graph, there were roughly 11 vacant for-rent housing units for every 1,000 people in the US, whereas today, we have just a little more than eight vacant for-rent housing units for every 1,000 people in the US.

The red line reveals that there were just under four vacant for-sale housing units for every 1,000 people in 2000, whereas there are about half as many today. When we examine both the blue and red lines together, we see that vacancies today are lower than at any time in the past 22 years. Homes today are being used at the highest rate on record, a sign that we have too few homes available for our growing population.

Finally, the gray line shows that about five housing units are under construction for every 1,000 people today (slightly higher than the peak in 2006). This could be a cause for concern, but the fact that homes are taking longer to build more than compensates for the difference in the totals of then versus now.

Erdmann advises:

The decline in vacancies since the Great Recession has been unprecedented. From 14 rental units per thousand residents to 8, and from 8 units for sale to 2. Back to 2000, the previous lows had been about 10 and 4. There are about 2 1/2 units per thousand residents under construction in both the apartments and single-family categories. In other words, if every single unit under construction was finished tomorrow and sold (all else equal), vacancies would rise back to where they were in about 2017 and 2000. Those were both periods with constrained supply, as evidenced by (the next graph), which shows shelter inflation (mostly rent) relative to non-shelter core inflation. Rent inflation should not be persistently more than general inflation.

Get Our Free Market Update

Weekly Special real estate report covers the Tallahassee real estate market

Other buyers, sellers, lenders, and real estate agents have this critical information, and now you can too!

Get immediate access to our most recent newsletter.

Let more than 30 years of experience work for you with charts, graphs, and analysis of the Tallahassee housing market.

Each Monday morning we send out a simple, one-page report that provides a snapshot of the Tallahassee housing market. It only takes 2 minutes to read, but it gives you better market intelligence than most real estate agents possess. Just tell us where to send it below!

Home Affordability Is Tanking Fast

Long-time readers of the Tallahassee real estate blog know that we have been warning about a home affordability crisis for several years, long before mortgage interest rates and home prices rose to current levels. This graph shows the problem has been brewing far longer.

Graph compares US shelter inflation with US Core Inflation January 2023

In the graph above, the red line plots shelter inflation (mainly "rents), while the blue line plots the non-shelter core inflation. The gray line reveals the difference between the two measurements.

At the far left of the graph, shelter inflation trailed non-shelter core inflation by nearly 18% from 1957 through the late 1960s. This means that rents were rising at rates slower than most goods and services.

At the far right of the graph, we now see rents growing far faster than most goods and services. A simple conclusion from this graph is that compared to other goods and services, the cost of renting a home has been rising fast.

I have highlighted three points on the graph:

A. Something occurred in the late 1960s that caused rents to accelerate in growth more so than other goods and services.

B. In the mid-1980s, we saw shelter inflation draw even with non-shelter core inflation and then finally pass it. In other words, this is when the home affordability crisis began to develop!

C. Something occurred in the mid-1990s that caused shelter inflation to accelerate far faster than non-shetler core inflation.

I suspect some of our readers will have ideas about what happened at points A, B, and C. If you think you know, share your thoughts in the comments below.

Home Affordability (Worse Than A Housing Bubble)

No housing bubble is forming. The National Board of Realtors estimates that the US is about 5.5M homes short of what is needed for balance in the overall US housing market. A housing bubble, on the other hand, requires the supply of homes to grow and outrace a declining demand.

The total pipeline of new homes under construction is less than one-third of the shortage. Remember, we don't need 5.5M homes to balance the market, we need 5.5M homes PLUS the "normal" 1.2M average annual new home construction deliveries. When we account for the number of homes needed to keep the market at its current under-supplied state, the current pipeline level won't fix the housing shortage within the next ten years.

So long as builders build too few housing units, we don't have to worry about supply running amuck. Yes, the pipeline of homes under construction is higher than usual, but so is the time it takes to bring these (much-needed) homes to the market. When we look at how the increased pipeline has influenced supply, we see the deficiency grow.

Home affordability, on the other hand, is a real and valid crisis.

I am a broken record on home affordability, but it's such an urgent and important issue that it requires mentioning again. Home affordability is tanking in the US and is directly related to the lack of shelter required by our growing population.

The pace of new home construction slowed in 2008 and has remained far too low for more than 15 years. This shortage has created soaring rents, soaring home prices, and a reversal in the US homeless trend in 2018.

If you want to be part of the solution, it starts with choosing elected officials who understand the need for housing and then holding them accountable for delivering solutions.

7 Critical Graphs Zillow Decodes US Housing Market Complexities
If you've ever wondered why home prices are skyrocketing or why your dream home feels increasingly out of reach, Zillow’s report is your roadmap.
What 'normal' has meant over the years - Understand where rates are going
Watch through the end and you'll understand when mortgage interest rates return to normal.
Will Robert F. Kennedy, Jr.'s Plan Work?
Robert F. Kennedy, Jr. presented his plan to fix the affordable housing crisis by creating a housing boom. Do the facts underpinning his promises hold water?
Foreclosure Crisis: What the Data Tells Us
Are you curious about what's really going on with foreclosures and loans in forbearance? Worried about the next housing crash?
Big Redfin Report: First Time Redfin Saw THIS Since 2012!
Recent housing market data from Redfin, the large online real estate portal, shows that something occurred over the past two months that has not happened in the past ten years.
Are Home Prices Heading for a Crash?
The US housing market has been a frequent topic in the news, but a crucial factor is being ignored when determining the direction of US home prices.
How Bad Is It? SHOCKING Building Permits Report!
The lack of home affordability has become a widely discussed issue in the media - the shortfall in new single-family home permits and multi-family property permits and construction exacerbates the current housing crisis.
Will New Construction Bottleneck Cause A New Housing Bubble?
Are you concerned that the bottleneck of builder homes under construction will cause a new housing bubble as they are finally completed?
The Unaffordable Housing Paradox: Why Homes Are Out of Reach
The affordable housing shortage has this solution. It requires changes in urban planning that pay attention to housing costs and housing economics.
Google Knows. The Surprising Real Estate Market Forecast You Won't Believe!
Is it possible to forecast home sales in the US housing market with a search on Google? I had this thought about Google and a google housing market forecast as I was reexamining our search engine optimization efforts.
The Truth About Foreclosures - Mortgage Pipeline Update
The best way to start to analyze the potential for mass foreclosures is to break down the current mortgage pipeline to observe forming trends.
Zillow Housing Market Update
Zillow data unveils the great twists & turns shaping US housing trends, shedding light on the challenges and opportunities ahead.
Zillow Drops Bombshell Real Estate Update
You won't want to miss the latest data release from Zillow. They've just dropped a bombshell of a report that will significantly impact the housing market.
Renter Nation Says Goodbye To The American Dream!
It's the beginning of a generational shift in the housing market that will greatly reduce homeownership and push the US towards becoming a renter nation, one in which Wall Street is in control of both home prices and rents
The Surprising Way Interest Rates Move The Market
When mortgage interest rates change, housing market experts surface and make bold claims on how the market will unfold. They are usually wrong!
Home Affordability Falls To 40-Year Low!
It's been over forty years since homes were more expensive than today when you factor in inflation, home prices, and mortgage interest rates.
Biden Rent Control Plan
The White House announced an executive action that Biden says is designed to "protect renters and promote rental affordability," but I cannot imagine a worse response from our Commander In Chief to confront the nation's housing and rental affordability crisis
Market Equilibrium, How The Balance Has Changed In Real Estate
The way we estimate housing market equilibrium has changed, and with it, the way the market is evaluated must change.
What You Don't Know About Home Prices!
Home prices are gaining traction as topics in both the mainstream media and social media, but there are three common misconceptions about the change in house prices that are unanimously reported as unquestionably true.
New Home Construction Report
Kevin Erdmann Housing Update September 2022 - Explains the new home construction pipeline and what to know about the number of homes being built in the US.
Unlocking Zillow's Latest Housing Trends And Forecasts
Zillow has shared its extensive data that we have used to generate our monthly housing market update. Zillow reports this right now:
Zillow Exclusive: 5 Charts on the US Housing Market You Can't Miss!
Zillow has just released new data that provides valuable insights into the changes taking place in the real estate industry.
Why Vacancy Rates Are the Hidden Indicator of Housing Market Health
Imagine shopping for a new home—whether you're aiming to buy or rent—and finding that every other house on the block is empty. Conversely, imagine a tight market where you can't even find a rental property, let alone purchase a home.
House Prices - Inflation Adjusted Home Prices
Just How High Are Today's House Prices? The price of houses in the US has risen to a toxic level, and many are wondering how they will be able to afford to live in their local communities
USA Today Misleads Readers About Home Prices
USA Today Misleads Readers About Home Prices - Median Home Price: The USA Today Network has been misleading readers, using the median home price change suggesting that houses are getting cheaper and a real estate crash is upon us. Is this poor journalism or is there something more to it?
Economic Outlook For The Housing Market
Joe Manausa gives an update on the economic outlook for Tallahassee and the US housing market. Includes housing market forecast, housing market activity, and new construction analysis, and reveals how Tallahassee compares with the overall US housing market.
Podcast: Housing Myths Dispelled
Home Building Hero David Belman and Joe Manausa discuss many of the "myths" that have been published in the media about the housing market.
Are Wages Keeping Up With Rising Home Prices
Home prices are rising. Mortgage interest rates are rising. Are people earning enough money to buy homes today, or is the home affordability crisis getting worse?
Zillow Housing Market Update
In this must-watch video, we delve into the roller coaster ride that is the real estate market. Discover the latest insights and trends from Zillow.
Zillow - Surprising Home Sales Report
Zillow has something to say about the housing market. Zillow's data suggests something else is happening. And it’s not just Zillow.
Zillow Exposes Mainstream Media On Home Prices
Zillow serves up the data that exposes the poor reporting of the mainstream media on Zillow home prices and that conditions are not what they seem.
Housing - Do You Follow Your Gut (Or Analytics) In Housing?
I think the signs in the housing market are loud and clear, yet most real estate reports I read or view are missing the most critical factor in housing today.
6 Housing Market Rumors Debunked (1 Confirmed)
7 different housing market rumors are perpetuated as “FACT” in various forms of "hype." Discussion of this "housing market news" has been ongoing for years, so today, I want to put them all to rest.
Is The Supply Of Homes For Sale Finally Rising?
Is The Supply Of Homes For Sale Finally Rising? Is the US housing market heading for a crash? Will home prices fall? Follow the metrics that clearly show what to expect from home prices and the supply of homes for sale in 2022 and beyond.
Who To Blame For Soaring Home Prices
There is a huge shortage of homes in the US, and there is only one culprit to blame, and I’m going to tell you who it is!
When Will Home Prices Fall?
Are Home Values About To Crash AGAIN? Now that we've seen about three years' worth of skyrocketing home prices, prudent buyers with memories are asking when home prices are going to start falling again.
Home Ownership Is Radically Different For Millennials
This is a simple millennial housing case study that will clearly show that the millennials will face a housing market like no other generation going back to post-World War II.
Are We Overbuilding Again?
I've been asked recently for my opinion on the number of homes being built in the US. Specifically, people are wondering if the ghost of 2006 has come back to bring more homes to the market than what can be consumed?
Building Permits Reveal Major Housing Crisis
How do we know there is a major housing crisis brewing? Look no further than building permits! This video examines building permits in detail, as the issue of home affordability is going to become one of the most prominent topics for many years in the national media.
REDFIN Reports Falling Home Prices?
Does the latest Redfin real estate report show home prices falling? I reviewed the Redfin real estate data, but did I find home prices dropping?
Can Builders Save The Housing Market?
Home Affordability Crisis: Local Solutions ~ National Issue: Delving deep into current US homebuilder production. Enough? Short? A less optimistic real estate market outlook.

There are a lot of people who endorse Joe for the job of selling your home, from Barbara Corcoran (Star of ABC's Shark Tank) to Preston Scott (host of Tallahassee's top daily "Audio Magazine," as well as the thousands of happy customers Joe has helped in the past. Listen why!

Post a Comment

(850) 378-5727