Housing shortage could be looming as new construction slows

Housing shortage may loom as new construction slows

June 2, 2009 3:34 pm
Some experts predict there could be a shortage of new housing because of a slowdown in permit applications. Pictured here is an example of multi-family residential construction in the 1100 block of 156th Avenue Southeast in Bellevue.
Some experts predict there could be a shortage of new housing because of a slowdown in permit applications. Pictured here is an example of multi-family residential construction in the 1100 block of 156th Avenue Southeast in Bellevue.

It’s hard to imagine a housing shortage with home sales being as slow as they’ve been, but many industry experts say that such a scenario could unfold in as little as three years.

Todd Britsch, president of New Home Trends, predicts that thousands of empty plats could fall out of the permitting pipeline in coming years.

Real-estate prices have trended downward since hitting unrealistic highs around 2005, and most people are left with property that is worth less than what they bought it for.

“The owners have paid way too much for the dirt, and they can’t bring them to the market effectively,” Britsch said.

It all started with those notorious stated-income loans, which allowed borrowers to obtain easy money – more than they could realistically pay back.

This prompted bidding wars among prospective property buyers, which in turn allowed an artificial spike in values.

Raw land sold during the housing boom at prices that finished lots would now sell for. Today, that leaves little to no incentive for developing.

But regional growth projections indicate that nearly 2 million new residents will trickle into the Puget Sound area over the next few decades. Without development, this could lead to a massive housing shortage.

Britsch suggests there could be a considerable dip by 2012.

“We could have less than a 24-month supply of homes selling and proposed if things don’t change,” he said.

Britsch says there are two things that could help moderate a shortage: patient investment from the private sector, and streamlining of local platting processes.

Inflation is another concern when it comes to a potential housing shortage.

Real-estate sales are bound to pick up as prices fall and financing becomes available again. A lot of first-time buyers are now perched and waiting for the right moment to take advantage of the economic downturn.

Mike Appleby, of the Master Builders Association’s Affordable Housing Council, suggests that such a time is getting near, if it hasn’t already arrived.

“Your opportunity as a homebuyer is once-in-a-lifetime right now,” he said.

But once existing properties go, there could be little left, and the laws of economics say that real-estate value would skyrocket again.

“If that happens, only the elite will be able to afford a home,” Britsch said.