The simplistic view is that residences are either rented out or occupied by the owner. In reality a speculative boom creates excessive demand which increases the number of residences that are second homes, Airbnb's, undergoing renovation, on the market, land-banked, etc. Most of this is made possible as capital gains become more significant relative to yields.
It's counterintuitive but a speculative boom can lead to both higher prices and a higher proportion of underutilised residences.
I still have not seen a convincing response to the demographic argument I put forth. The generation entering the housing market now is the large Millennial generation; the generation dying is the small Silent generation. For everyone who wants a house to get one, we need to be building the delta in size between these, and we're short by several million.
Well, implicit in this argument is that a non-trivial percentage of the Millennial generation is actually able to enter this market. Is that actually true? I'm not really convinced that is it, as there's been a lot of chatter about this generation putting off important life milestones like family formation, which would precipitate home buying. To be fair, and to potentially anticipate the counter argument, when the boomers were at this same stage in their life interest rates were much higher. But ... family formation was a much stronger cultural imperative at that time. It very much is not so today.
>For everyone who wants a house to get one, we need to be building the delta in size between these, and we're short by several million.
I agree with this, but for philosophical reasons and not structural ones. If I'm some jerkoff investor, trying to maximize profits, yeah I'd only build high rise lux condos and squeeeeeze that yield because, let's be honest, building family homes doesn't really do that.
To extrapolate out permanent conclusions from a point in time inventory metric is completely flawed analysis.
I'll refer you to the generationally low inventory in the 2000s, coupled with similar widespread shortage narratives. It won't end via the same mechanism, but each bubble is unique.
Inventory will continue to rapidly increase as rates stay over 5%
And again, rate of construction relative to population growth is at an all time high. Every narrative around a supply shortage focused on inventory is clearly and obviously flawed/wrong