The supply side: Why there are so few homes in the Albuquerque’s Real Estate Market?
(Transcript Snippet): “Tego:
So let’s go through this. Why do we have so few homes on the market? Let’s just talk about the supply side in the last 10 years. Well, let’s put it this way. There’s been a 10 year plus years of under building new constructions. There just haven’t been enough homes built to take up the, the demand plus future demand. And future is now here. I’ll get into the second, but we’re going to talk about the whole millennial thing and why that, that demand is there. So the future is here and there’s big demand, but there’s been 10 years plus of underbuilding. There’s a lot of reasons for that. Just give you some statistics to back that up from, in the seventies, in the United States, there are 11 million homes built in the eighties. There were, let’s see, 9.8 million home built in the let’s say the, the, the 2000, right.
Tego:
There were 12.6 million homes built. And then in the 2010 to 2019, there were 6.5 million home built. So, so you see about, you know, we’ve had this huge decrease in the number of homes built, and so it’s really affected and just what’s available. Couple of things have created that. Why were there so few homes built over the last 10 years? Well I will say that it’s, it’s partly just being conservative, the people, I mean, a lot of people got hurt in the housing bubble builders, developers, contractors, obviously. And, and they they’ve been much more conservative, but the ones that made it through, and then there were a lot that didn’t make it through. Meaning there just were less home-builders in, in the entire country.
Tego:
One of the things that happened was the cost of lots, meaning finished, ready to build lots. So what happened was at the end of the pandemic, we had all this oversupply, a vacant lot ready to build lots. Well, now those all have been used up and they’ve been used up now for a few years and th the process to bring new lots new building sites out of the ground. It’s a slow process. Think a year, two years, three years permitting construction investment, and again, millions of dollars of investment to get these subdivisions built out. And you know, people are being conservative on their investment. Interesting thing that that happened in the mid let’s say 2013 to 2018, there were a lot of stories about the lack of skilled trades people. And it, you know, people that follow the news, you probably heard this well, that trend really caught up to us.
Tego:
What happened was at the end of the, the housing boom. And while at the beginning of the housing bust, let’s think 2009 those jobs just kind of went away. A lot of people left the trade, the skilled trades, electricians, plumbers, framers, you refer to all, all those things. And I mean, there’s a story from 2013 here I have here from Forbes talking about let’s see. So the, the headline is, and this is from 2013, but think about this American skilled trades dilemma, shortage, loom as most in demand group of workers by ages and most what happened is over the years here, the trades people just were getting older and older and there were less trades people coming into the industry. When I talked to home builders or any of the groups that do surveys with home builders here, locally myself, or nationally with some of these other folks, when they talk to home builders and say, okay, what are your challenges right now? How come you’re not building more homes, right. We’re all saying, why aren’t you building more homes? We need more homes there. They’re just saying, well, costs let’s put cost aside. That’s a whole other conversation. Their costs have gone through the roof, but, but labor that just skilled construction labor is in high demand. And so they’re, you know, they’re, they just can’t basically get people to build the homes as fast as they would like. So that’s one part. Okay. So, oh,
Eddie:
Tego let me just a recap here,
Tego:
Just get one subject on supply. So anyway, but yeah, I know it’s, it’s,
Eddie:
Well, you’re throwing out some things here that I think no one is talking about as far as the market. And I think they’re so on point that I think a bear repeating, and it’s very troubling because this is a sort of a cultural, behavioral, social shift that is creating the problem. Not necessarily anything having to do with the housing industry in general the cost of the, the, the law it’s going up because well, you know, planning zoning, and then you have, LEED-certified being environmentally friendly, et cetera, et cetera, that has driven all the cost up for that. The cost of materials going up obviously that is creating a huge housing supply crunch fewer homes. I thought that was an absolutely staggering statistic. When you talk about, you know, in this population still grows and grows, but you’re talking about the shrinkage decade to decade to decade.
Eddie:
And that is very troubling, but, you know, here’s something that really stands out and that’s the retirement of tradespeople. That, that to me is right on point because my father who’s in construction is dealing with that very thing. I mean, he’s gone out and actually worked on jobs himself just because you can’t find people and you’ve got to get the job done. You’re under contract to get them done. So, you know, folks, when you’re looking at the reasons why a housing supply is not where it is Tego just nailed it. They’re right ahead. Let’s let’s continue.
Tego:
That’s just one, that’s just one piece of it. And I think that’s just it, you know, I see these stories, especially in let’s, let’s be honest, the mainstream media, you know, where they pick one little thing to say, this is why, well, you know, I I’ll probably say perfect storm 20 times here today, but there really is. There’s a bunch of things that have just trended that have brought us to the point where here in Albuquerque, let me put this in perspective. As of today, we have, let’s say 800 homes for sale on the market, active for sale, based on the current demand in our market, about 11 to 1200 home selling per month. And in the Albuquerque area, we could have, let’s say 5,000 homes, maybe even 6,000 before we get to a, what we call a buyer’s market where the, where the supply is high and the demand is low we’re so far away from that. So again, it’s, it is not a good, good situation in the sense of, of the, the way prices are going up so fast. One, one thing that has been happening, this supply thing, this did not just happen because of COVID. And I’ve been saying that over and over again, this was this one, the, what are people saying that, that COVID, COVID driven? It’s like, no, no, no, no, no. This has been coming on for a long time.
Eddie:
We had this problem a way before, way, two years ago. I remember because we saw just the declining number of homes that were there. I mean, this is you you’ve been tracking this for a long time.
Tego:
Yeah. Well, in, in COVID now I was exasperated that, so let me give you some stuff here. So COVID, COVID kept a lot of people from selling their homes in 2020 that may have sold. Right. You know, you think about the senior housing world, or it gets, this is a, this is a quote from a article in the season, senior housing world, senior housing occupancy falls to lowest rate on record. You know what that means is all those people, but that may be, we’re going to be going into senior housing last year. They stayed in their home. They didn’t sell their home. Those homes never came on the market. And we’ll see if they do, you know, a majority of homeowners in America are baby boomers, boomers, and many of them are now reluctant to move or downsize. So those, again, it’s just one of those other things that definitely were triggered somewhat by, by the pandemic.
Tego:
Another thing that’s happened over the last decade is, is we’ve had these really ultra low interest rates historically low. I mean, you know, even the 4%, right, we were going, oh my God, geez, rates are crazy. They’re never going to be this low again. Well, here we are at 3%, but anyway, but that, that incentivize many homeowners to stay in their homes much longer. I’m getting this quote from a story I read and I wish I knew who it was, cause I should be accrediting them for it. But that incentive, incentivize many homeowners to stay in their homes longer than they would have in the past. They’re clinging to their cheap mortgages, right? The low rates have encouraged many homeowners who bought the home not to sell, you know, and, and they’re just staying. And one of the things, one of the statistics to back that up is since 2008, the median tenure for somebody staying in your home staying in their home is three years longer today than it was just in 2008.
Tego:
To give you an example in Albuquerque, the, the stat is 10 years is how long people stay in their homes. I’ve seen another one that said it was 13 years. And the point is people just aren’t selling as quick. It used to be like seven years now. People are just not turning over again. That’s, that’s making it those homes again, never coming on to the market. So that’s some of it on the demand side. Let’s talk about the supply side. I mean, excuse me, that was the supply side. Now let’s talk about the demand side.