Future housing shortage?

The California Building Industry Association estimates that we need 240,000 homes and apartments built each year just to keep even. They based this analysis on the state’s population increases of 500,000 to 600,000 people a year that we know about.

If their estimates are correct, we are in for another housing shortage in the next few years. New single-family housing permits fell from 155,322 in 2005 to 107,000 last year, a 22 percent drop. New multi-family construction is up slightly (5 percent) but that’s still only another 25,000 units so we are still way short on what we should be building each year. This shortage of new construction starts could continue. According to Alan Nevin, the CBIA chief economist, home construction starts will continue to drop until remaining inventory is sold a process that he expects to be completed by the end of 2007.

Although many housing analysis believe the yearly 240,000 required new housing units are accurate I believe it to be way over estimated. Most of our increased population is from births and not from potential homebuyers relocating to California. Many adult children are continuing to live at home and many families double-up in a home or apartment. Still, the builders make a valid point. We are not building enough units to meet the future demand and the under supply and continued demand will contribute to home prices increasing beyond inflation.