One of the biggest drivers of rising home prices is a lack of supply of existing homes and new ones. And homebuilders are not able to build fast enough to meet demand right now.
One of the big problems here is the supply chain.
“Builders have a lot of homes under construction,” said Jeff Tucker, a senior economist at Zillow. “You know, what builders need is for all the materials to get delivered. They need the appliances, they need garage doors.”
Before they can even get there, they need raw materials. “Lumber and concrete and bricks and roofing materials, etc.,” said Jim Gaines, a research economist at Texas A&M University.
“The cost of all that has gone up, and also just simply the availability — it’s just not as available.”
Plus, there’s the labor shortage. There are not enough carpenters or electricians or truck drivers to meet demand.
There’s also the land problem. It exists, but because of zoning rules and other regulations, it can be hard to start building. The paperwork takes forever.
“Local municipalities and even counties in the past several years have had to cut back staff and have not added the staff back to simply get the job done,” Gaines said. “And some of the people who are being hired to re-staff, those areas are not as experienced.”
But where is this demand even coming from? People want new homes, but what about the ones they currently live in? Are there a bunch of places just sitting empty? The answer to that is no.
Turns out it’s the millennials’ fault again. There were a lot of us born around the year 1990. We don’t want to live with our parents or with roommates anymore. And we have finally saved up enough avocado toast money to buy a house.
“So there’s just an unusually huge wave of people going through that life transition,” Tucker said.
And the only thing that’s going to slow that demand — and we have started seeing the beginnings of this — is when prices go too high.