Housing Scenario

Depending upon the source, the number of new homes needed each year varies slightly and the following is the most recent estimate.

400,000 homes are demolished each year and must be replaced
1,400,000 new households are formed each year. Although there is evidence that this number has decreased since the recession started simply because of the job market and family members moving back together. As an example, college graduates are moving back with their parents since they can’t find a job.

In my June 18th post, I used 1,500,000 new homes are needed to satisfy the demand and replenish the housing stock.

So why do we have new housing starts hovering between 500,000 and 600,000 this year and LESS than 500,000 in 2009.

From 2002 – 2009, it is estimated that there were 3,000,000 new housing starts in EXCESS of the households formed.

A scenario that may happen:
Because of population increase and household formed, the demand is being met by the difference between the 1,500,000 new housing starts needed and the actual/estimated 600,000 new housing starts.

My simple conclusion is that the inventory of excess number of units built will exhausted between the end of 2011 and mid-2012. My prediction:

Housing shortage in 2012.
Interest rates much higher back to the 6-7% range
Material shortages i.e. concrete, sheetrock, lumber, etc.
Labor shortages
Results: inflation and escalating home prices

We have less than a year to position our business to a new reality. Don't be watching from the sidelines.
Review the following graph and come to your own conclusions. After all, I don’t expect anything from our national leaders anytime soon – after all they are on VACATION!!!