Is a housing shortage coming?

If shrugging off the worst housing crash since the Great Depression, it is not hard enough, you have to brazen for a housing shortage. Just 672,000 new homes were started in April, less than half the long-term run rate needed to meet the nation’s natural population growth. “It is ironic, but there is a growing consensus that there may be a new housing shortage coming,” said James Gaines, a real estate economist with Texas A&M. So far, the shortfall has been masked by a weak economy that has put a damper on home buying. Once the job market rebounds, however, people will look to have their own homes again. This pent-up demand could get unleashed on unprepared markets, causing shortages and rising local prices. But, those doubting a new bubble is near, point to a large inventory overhang. As many as 7 million homes are vacant but not for sale, according to the Census Bureau, which should provide cushion to offset increased demand.

Ordinarily, the nation’s home builders can react quickly to meet surges in demand. But several factors are preventing them from being nimble. The biggest is the difficulty getting loans, according to Jerry Howard, CEO of the National Association of Home Builders (NAHB). Too, many builders went out of business in the bust, so there will be fewer companies out there to do the building. The survivors will confront a transformed regulatory environment, according to Howard, that will make new homes harder to build and more expensive.

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As you know, The original $8000 tax credit was just good for first-time home buyers and was slated to end on Nov. 30. But Congress extended the credit to include contracts signed by April 30 and closed by June 30. It also made a refund of up to $6,500 available to existing homeowners looking to buy something new. Nov. 6 marked the date that the rules changed because an extended — and expanded — version of the home buyer tax credit went into effect. And that put filing for the credit on hold, and started a new IRS paperwork wrangle. Those homeowners who closed their sale before Nov. 6 used Form 5405 to claim the credit, but those closing after that date are in limbo because no form yet exists for them to file. The IRS had been expected to come out with a revised form by early January, but it has yet to release anything. Robert Dietz, an economist with the National Association of Home Builders who has been monitoring the situation, said the delay may be caused because numerous parties, including the Treasury Department, have to agree on how to process all the new documentation that the expanded tax credit requires. “They may just be making sure all their I’s are dotted and their T’s are crossed before they release it,” Dietz said.

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