The Housing Shortage Is a Lie
For years, we’ve been told the same story:
Housing is expensive because we don’t have enough supply.
It’s a clean narrative.
It’s politically convenient.
And it’s wrong.
If you misdiagnose the problem, you make it worse.
This is not a housing shortage. It’s an affordability collapse.
The Big Lie: “We Don’t Have Enough Homes”
Even JPMorgan recently admitted the “shortage” is about 1.2 million units (not 5-6.8M range estimated by NAR… an 82% difference, but, you know - who is counting anyways, right?).
But here’s the key:
It’s not a shortage of homes.
It’s a shortage of affordable homes.
There is a massive difference.
We built inventory at price points the next generation simply cannot afford.
And now we’re watching the consequences.
What Actually Caused the Bubble
The real driver of housing inflation over the last 40 years wasn’t organic demand.
There are studies from major Wall Street banks showing:
50–80% of home price appreciation came from falling mortgage interest rates.
Not wage growth.
Not population growth.
Not real productivity gains.
Just cheaper debt.
We live in a payment economy. Lower rates don’t make homes affordable — they increase the maximum price buyers can bid.
That locks in higher price levels.
But wages didn’t keep up.
In Florida, for example:
Home prices more than doubled over the last decade
Wages rose roughly 30-40%
That gap is the problem.
The COVID Demand Shock (That Everyone Mistook for a Supply Problem)
What happened in 2020–2022 wasn’t structural demand.
It was a demand shock.
We fast-forwarded five years of buying into two.
Massive migration to the Sunbelt
Speculators buying 4–8 homes at a time
Institutional buyers using warehouse lines and securitization structures
Builders selling homes before they were even built
That wasn’t healthy demand.
It was speculative acceleration.
Builders saw it and thought, “This will last forever.”
It didn’t.
Now they’re finishing projects that were started two years ago — into a market where demand has evaporated.
Florida: Ground Zero
Let’s talk about what’s actually happening on the ground.
In Jacksonville and much of Florida:
Prices are down 15% from peak (more in some areas)
Southern Florida has seen 30%+ corrections in certain segments
Rents are down roughly 20%
Net domestic migration is down 93%
International immigration into Florida is down 70%
Multifamily is overbuilt
Build-to-rent portfolios flooded supply
We have rising supply and falling demand.
That is not a shortage.
That is the early stage of a reset (mean reversion). What else do you expect after a 68% run-up within a few years?
Why Rent Is the Canary in the Coal Mine
Here’s the math no one wants to discuss:
Redfin estimates you need about $111,000 income to afford the typical U.S. home.
You need about $76,000 to afford the average rental.
That’s a 46% gap.
When rents fall, investor math breaks.
And investors made up roughly 30% of purchases in Florida.
Further, for retail buyers, you can rent a house for $1,000 less per month than owning it…
Why would you buy?
When rent declines, investors step back.
When investors step back, the marginal buyer disappears.
When the marginal buyer disappears, prices must adjust.
Why It’s Moving Slowly
Real estate is illiquid.
It doesn’t crash like stocks.
In 2008, we didn’t bottom until 2012 (and that was after forced selling of distressed properties by banks).
We’re now in early-stage decline:
Transactions in Florida are 20-25% below 2019 levels for existing homes
Inventory is climbing gradually (minus the rage quitting)
Sellers are slowly becoming realistic
These cycles can take 5–10 years to fully play out.
But the structural issues are clear:
Slowing household formation
Falling birth rates
Aging Baby Boomer population
Migration changes
Consumers maxed out on debt
There is no demand engine waiting to re-ignite this.
The Consumers Are Tapped Out
We’re seeing:
Record auto repossessions
Rising student loan defaults
Rising credit card delinquencies
Wage growth stalling
AI reducing labor demand
If people are struggling to pay car loans and credit cards…
How are they going to make the largest purchase of their life?
Even if rates drop.
“But What If the Fed Cuts to Zero Again?”
Let’s assume:
Massive QE
Federal funds near 1%
Aggressive MBS purchases
Would that fix it?
Maybe temporarily.
But all that does is:
Devalue the currency further
Extend the bubble
Destroy middle-class purchasing power
And structurally, the next buyer still isn’t there.
If the money isn’t there, the seller can’t charge it.
The Most At-Risk Buyers
The people most exposed:
2022–2025 buyers
FHA (3.5% down)
VA (0% down)
High-leverage new construction buyers
Many are already underwater after fees.
Worse:
Builders are finishing Phase 2, 3, 4 of developments at lower prices.
The house down the street may be $100,000 cheaper.
Florida homeowners don’t hold for 30 years.
Average hold times are 8–12 years.
Add:
10% round-trip transaction costs
Life events (job loss, death, divorce, relocation)
And you have forced sellers.
That’s when the reset accelerates.
My Prediction
From peak (October 2022 in Jacksonville), my modeling suggests:
31–42% potential downside
based on investor backstop math.
That’s roughly in line with GFC declines (40% decline in Jax during GFC).
Could it be less? Yes.
Could it take longer? Absolutely.
But the math doesn’t currently support today’s price levels.
And I follow math — not narratives.
What I’m Personally Doing
I sold over 200 units.
I exited in 2022 when rates started rising.
I’m waiting for:
Mean reversion
Investor math to make sense
Rent-to-price alignment
When the fundamentals align, I’ll buy again.
Not because housing “always goes up.”
But because the math works.
If you want analysis based on fundamentals, not headlines, subscribe below.
Think big. Question everything. jon@movewithmomentum.com. thinkbigquestioneverything.com
