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Another reason there seems to be a "shortage" of homes is that there isn't an OVER ABUNDANCE of homes.

Let me explain.

Home building is way down.

Before the bubble burst, there were homes being built everywhere. Financing was cheap and very easy. Not just the buyer, but the builder too.

Builders are leary to build, plus they can't get the financing to build like they once could.

I agree...but let me add a few things. In many areas, there are ‘good parts of town’ and ‘bad parts of town’, as far as housing is concerned. Crime, school district, whatever has made some areas the preferred place to buy.

These ‘good parts of town’ areas were sprawling away from the city center, extending utilities like sewer and water as they went.

When the bubble burst, we were left with a zone of failed development, on the edge of the city. There are bare lots, possibly with only pavement but no utilities like power and gas installed. The lots are burdened with developer mortgages, as well as high special assessments to pay for the street. They are poison...nobody is going to buy them.

This band of failed development serves as a giant moat, preventing additional development. Its too expensive to build utilities through these areas, to start new developments further out, on land that isn’t poison.

This all equates to alot less development and building.

Also, most of the developers still standing in my city are now doing very small phases...so as not to become too leaveraged. These small phases can’t keep up with demand; but, they and th banks will not do larger phases for now. I’m talking 16 lot developments.

Before the bubble burst, there were homes being built everywhere. Financing was cheap and very easy.

Austrian economic theory explains this quite readily. Artificially low interest rates lead to malinvestment, that is, investment in things that would be uneconomical at real market interest rates. So we had over-investment in housing. Then the bubble burst. Lots of unwanted housing, and housing people realized they couldn't afford.

I'll give Rudyard Kipling the last word:

And that after this is accomplished, and the brave new world begins

When all men are paid for existing and no man must pay for his sins,

As surely as Water will wet us, as surely as Fire will burn,

The Gods of the Copybook Headings with terror and slaughter return!