The economics of a housing shortage
Simply put, the economics of a housing shortage mean the price of homes go up. When this happens, there's less affordable housing, and fewer people can afford to buy. The only way to get prices back down when demand is high is to increase supply.
Investment opportunities during a housing shortage
As people leave urban areas during the pandemic, the suburbs seem to be a good investment. The trick is to not overpay for investment property, difficult to achieve during a housing shortage, as there will probably be lots of competition.
One strategy might be to work with a real estate agent or an investor group. That way, you might hear of deals before they hit the market. Tempting as it might be to enter the real estate investing world now, you always need to ensure you strike a good deal. Paying top dollar is usually not the best way to invest.
How investors can take advantage of a housing demand
Investors in the rental or fix-and-flip business who are sitting on homes have it made. In both cases, you get to call the shots on what you want to do.
If you're a flipper, you're likely to sell quickly for a profit. The difficult part is acquiring the property, since your competition will be stiff. If you're a landlord and own rental properties, you have options. The rental market is strong, especially in the suburbs, with people who want to escape the city and can work from home.
But if you're done with the rental business -- maybe the eviction moratorium has pushed you over the edge -- and want to cash out, now's the perfect time, as you'll likely get top dollar for your properties.
The Millionacres bottom line
The United States is currently undergoing a severe housing shortage, the likes of which we haven't seen before. Trying to buy a property during an affordable housing shortage will likely prove challenging. Prices should remain high throughout spring 2021 at least. When more inventory becomes available, and especially if interest rates start to rise, we should start to see a more normal housing market.