There is a serious shortage of housing in the United States, and the real estate industry is calling attention to the severity of the problem. It cuts across single-family homes, townhouses, condominium units, and rental units, as reported by The Washing ton Post. Homebuilding company Taylor Morrison CEO Sheryl Palmer told CNBC that the housing shortage began over a decade ago. The industry will not be able to catch up for several more years.
The National Association of Realtors (NAR) asked the Rosen Consulting Group to do the study, Housing is Critical Infrastructure: Social and Economic Benefits of Building More Housing, published in June 2021. It stated that there had been two decades of underinvestment and underbuilding in U.S. housing, with growth from 2000 at an annual average of one percent, going down to 0.7 percent in the last decade. This resulted in a shortage of 5.5 million housing units. After adding house demotions, loss through natural disasters, and destruction through aging, the actual shortage becomes 6.8 million. As of 2020, however, the pace of building was just 1.3 million units a year.
Construction Materials Shortages and High Prices Hamper Building Momentum
The pandemic has further hampered the momentum of homebuilding. CNBC and Fortune explain that there is a shortage of lumber and steel necessary for homebuilding because mills stopped production at the start of the pandemic. They did not expect demand to rise too soon, and it is not easy to ramp up production again. This has resulted in steep surges in pricing, with up to a 215 percent increase in steel supply pricing from March 2020. Retail prices of lumber are also still as much as double that of spring 2020.
High Rent and Home Prices Hit Renters and Potential Homebuyers
The two decades of underbuilding also reduced the number of rental units and raised the rent. Long before the pandemic, over 40 percent of renter households were already financially burdened by the cost of the rent. Almost a quarter of renters were severely burdened, meaning they spent more than half of their household income just on rent. Considering that these are low-to-medium income families, this means that there is little left for basic needs.
This was already the case in 1919, when rent stayed at a relatively stable level. In 2020, rent increased in the range of one percent. In 2021, however, renters were bludgeoned by a sudden nationwide increase of 6.5 percent year-over-year in median rent for two-bedroom units. The nationwide median rent increase for one-bedroom units was 4.9 percent year-over-year.
If renters decide to buy a house instead, they will find that the prices of homes have exceeded the national income growth in the last two decades. It has worsened during the pandemic. More people cannot afford to buy a median-priced home.
Homeowners Choose to Renovate
Among those fortunate enough to own a home, 52 percent count their blessings and choose to improve on what they have rather than looking for a better home. This was in the survey findings that DEWALT commissioned Atomik Research to do among 2,516 U.S. homeowners from May 21 to 30 this year.
More than seventy percent of respondents were about to embark on a major renovation project within the next six months. Among them, 64 percent have a budget of more than $10,000, and 28 percent expect to spend a minimum of $30,000. The most common projects involved bathroom remodels among 42 percent of respondents; kitchen remodels among 40 percent; bedroom remodels among 28 percent; makeovers of a porch, patio, or deck among 21 percent; and landscaping among 21 percent.
DEWALT asked Kyle Stumpenhorst, a professional builder and YouTube star, to share tips with homeowners who are about to renovate. Stumpenhorst advised that homeowners start now rather than wait for the prices of materials to go lower because there is no guarantee that they will. Waiting will only make access to the best contractor more difficult as other homeowners get in line.
Also, when choosing materials, homeowners must not opt for the cheapest ones. Lower costs can sacrifice quality. Moreover, using low-quality materials may result in projects that need redoing.
He urges homeowners to do due diligence in research before choosing a contractor. He highlighted the importance of checking each contractor on the Internet and looking for reviews on social media and other platforms. Studying the contractor’s previous and current work online will also determine if he is the right fit. When working with the contractor, bring pegs for the design, paint color, and other details for easier collaboration.
Investing in improving your current home is a sound decision. Not only will it improve your living conditions, but it also increases the value of your home and, therefore, your wealth.