Natural Population Growth Equals Future Housing Demand
The current home sales activity is matching levels seen 12 years ago, yet the total population has increased by more than 30 million since then.
Palm Coast, FL – September 10, 2011 – The current home sales activity is matching levels seen 12 years ago, yet the total population has increased by more than 30 million since then. The rise in population does not always mean a proportional rise in housing demand if people double and triple-up. That is, there is no housing demand if additional roommates are acquired and young adults move back in with their parents. Still, a clear-cut mismatch is arising between home sales and population, and this mismatch cannot continue indefinitely. There is a limit to the number of roommates it is possible to have, and parents and kids will get on each other’s nerves at some point. Thus the mismatch can be viewed as a source of future housing demand.
One interesting aspect of the population increase is slower natural population growth. (Immigration numbers are not considered here.) Considering only U.S. domestic live births and domestic deaths, recent data points to one of the lowest paces of population growth on record. Only 130,000 people per month are being added to the country. A more normal pace would be something closer to 150,000. This slowdown also means a slower pace of future move-up buyers arising from changing family circumstances.
The Great Recession has been painful in many respects. Population growth has also been hit. Still, this only means that the big mismatch between home sales and population continues to widen further but at a slower rate. The pent-up housing demand continues to build.
Source: National Association of Realtors®
Population Growth
This is the very first time I have read an article mentioning the very point that I myself have made to many people while discussing the future of single family housing. That is the fact that while we are currently producing 75% less single family houses than we were before the crash, populations (nationwide) continue to increase. The fact is that currently, we don’t need to build many houses. We need to get all of the foreclosures, pending foreclosures and short sales processed, cleaned up and occupied by people who can afford to make the monthly payments, mow the lawn, pay the taxes and restore some stability to our neighborhoods. I believe that it is an inevitable and probably unavoidable fact that we will at some point see a severe housing shortage based solely on these facts alone.
Yes, people and even families have moved in with each other as a way to get through this "housing crisis" but, for most people this is a temporary measure, not a long term solution.
As it has always been, home ownership continues to be highly regarded by most people all over the world.
If you have a good, reasonably stable job right now and plan to be in a particular area for at least 5 years, you can get the absolute "deal of a lifetime" on a house right now. And you can get an interest rate of 5% or less. In many cases, you can buy a nice house for less than replacement cost. You see, while house prices have taken a "nose dive" over the past 5 years, lumber, sheet rock, concrete, wiring, plumbing, etc. have all continued to rise. Thus, the house you can buy today for say, $175,000 could not be built today for that price. And many of today’s foreclosure houses are less than 10 years old. In those cases you are typically only dealing with "cosmetics". Paint, carpet, yard work, a good cleaning, etc.
This housing opportunity has never presented itself before and will probably never present itself again.
The "mob" is always late. By the time the "average joe" got a contract to "flip" a presale condo in Florida in 2006, the money had already been made and the ship was ready to get over loaded and sink. Likewise, the "bottom" of the housing market will not be seen through the windshield, but through the rear view mirror. Three consecutive quarters of solid price gains, for instance. Then, once the headlines tell us that the bottom is behind us, reports of significant housing shortages will likely follow.
It is clear to me that a severe shortage of single family houses would have already been detected if not for the "tidal wave" of foreclosures that has served to take the place of all those millions of houses that have not been built. Once we get all of those foreclosures dealt with (and eventually we will), then we will suddenly see that we are indeed experiencing a very significant shortage of housing.