As we all know, the residential real estate market and prices have been on a tear for several years, and this was only accelerated by COVID.
The reason for the dramatic rise in prices is simple: supply and demand. Following the 2008 financial crisis, home builders have been much more cautious and deliberate in ramping new construction. This has caused a serious shortage in the supply of new housing across the country.
Based on historic data, the shortfall in supply is estimated to be running 40-50% below long-term sustainable demand.
We get a lot of questions from clients about whether the strong house price gains can last. Is the “bubble” ending? We believe, at least in the near term and barring a major economic setback, housing prices will continue to rise at a rate above that of overall inflation due to the continuing supply shortfall. So, no, the housing “bubble” will most likely not end soon in our estimation.