Housing Supply & Demand

The following estimate represents the annual demand for new housing units (in millions)
Source: Credit Suisse, March 9, 2012

Household formations                            1.31
Net Removal of housing units                 0.26
Trend growth of vacant units                  0.05
Placements of mobile homes                (0.14)
Units started but not completed             0.06

Required ANNUAL number of housing starts              1,540,000*

* I have been using 1,200,000 annual housing starts as the benchmark for a thriving economy.

From the above demand analysis, household formations are the key factor. I am providing the following graph to illustrate the lack of housing formations over the past several years.

New Housing Starts

                                       Housing Units(x000)

2006                                       1,649

2007                                       1,037

2008                                         560

2009                                         581

2010                                         539

2011                                        697

Conclusion: the demand is there and will surface with dramatic consequences. The supply is not available and new homes construction will take awhile to ramp up production. We are also entering the last few months of production before winter in most