Kona Kohala Blog

. . . this coming.  Today I open my real estate news and what to my wondering eyes should appear but concerns about housing shortages.  The article reports that with only about 78,000,000 empty homes in the major metropolitan areas in the country and new housing construction at a near stand still, we're about to enter a time of short supply.  The author believes that lending practices are going to return to normal by summer and housing sales will pick up.  The existing inventory will be gone in 3 to 4 months.

When that happens, people are going to be looking for new homes.  Because new construction has been so slow all associated industries, drywall was the example he used, will take time to ramp up to meet the coming production needs.  Besides those industries, it's going to take time for local planning departments to move forward with developer's requests for permits and rezoning in some cases.

He further proposes that shortages will then occur leading to higher prices and more inflation.  This one scenario, I'm sure there are others as well.  The CEO of Walmart's U.S. operations was quoted this morning as saying they were preparing for inflation to hit by the end of summer.  With that in mind, Walmart is in negotiations with suppliers and looking for ways to keep costs down.

He also said that rising prices due to pent up demand will cause more inflation.  The cost of raw materials has increased along with the costs of manufacturing.  Once it's manufactured, it has to be transported and everyone knows what's been happening with transportation costs.  We're all going to see higher prices in all retail stores by the end of July.

The days of large inventories and low interest rates are about to end according to these two long range forecasts and it's not even that long range with April being tomorrow.

If you're waiting to jump into real estate you may want to validate your reason.  Make certain that your reason is still true.  If you're waiting for prices to drop make sure that the savings you're looking for in price will offset the increase in interest payments.  In my most recent newsletter I pointed out that we have only a 3.5 month supply of homes under $400,000 in North Kona right now.  If lending loosens at all, those homes will be gone in a flash and what's going to be available in that price range will be nothing but junk.  I wouldn't wait too long if you're in a position to buy.