Part 5/11:
The inelastic nature of real estate demand means that when there’s a significant drop in new construction, rents tend to increase precipitously. The speaker explains that rising interest rates, escalating construction costs, and economic uncertainty have further dampened new development. With permit approvals in decline, the supply of available units cannot keep pace with demand.
This creates a "perfect storm"—housing supply shrinks while demand remains steady, causing prices to surge. The speaker emphasizes that these issues are compounded in Seattle due to local policies that actively restrict housing development, rather than any supposed influence from rental software.