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Housing Analyst Predicts Lower Prices Amidst Low Demand
2 minute read
December 3, 2021

Contrary to popular belief, one housing analyst says there is no current housing deficit — and anyone who says otherwise is creating a false sense of security.

Ivy Zelman is known for calling the top of the housing market in 2005, ahead of the 2007 crash. Her firm, Zelman & Associates, released a report stating that estimates of a housing deficit are “grossly exaggerated.”

According to the report, titled “Cradle to Grave,” both single-family and multi-family production are ahead of normalized demand.

In a recent interview, Zelman said current activity points to an overbuild situation that doesn't match demand.

Freddie Mac, on the other hand, has repeatedly reported the “severe deficit” in housing, which is contributing to high prices. 

Zelman said it’s impossible to understand the real housing demand because of the number of firms buying and building properties to rent. In some communities, investors are driving the demand for housing rather than families.

In the report, Zelman’s firm says population is the largest determining factor in housing demand. 

Since U.S. population growth rates are slow and adults are living with their parents or grandparents longer, demand is slowing while builders continue to build.

Zelman believes this combination of rental community growth, lack of population growth, and rising mortgage rates have driven up home prices and made homeownership unattainable for many.

The supply chain issues that have boosted building costs and slowed construction rates actually are keeping the housing market from “blowing up,” Zelman said, rather than creating a true deficit.

Eventually, this oversupply of homes and lowered demand may cause a price drop.

With conflicting trends, confused homeowners still have options. 

While it may not seem like an ideal time to make any housing moves, homeowners can weigh their options based on individual needs.

Despite rising rates, those who purchased a home during a past period of higher rates can work with a mortgage lender to determine whether refinancing is a smart move. 

Borrowers still may be able to tap into savings by adjusting their rate and terms or taking cash out for other purchases.

Interested homebuyers who are having difficulty finding homes in their price range may need to widen the search field. Or even hold off until prices level off in the future. In the meantime, it’s recommended that future homeowners work on building adequate savings, boosting their credit score, and paying down debts to acquire the best personal rate.

Photo by David McBee from Pexels

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