The following article was published in Property Wire, Economists warn of severe shortage of property in US as construction dives, indicating we are soon to be in dire straights because we are not building enough new housing.
I DISAGREE !
The article claims, “Several leading economists are warning that not enough new properties are being built to keep up with expected population growth.”
- Brian Wesbury, chief economist at First Trust Advisors, says the US needs “1.6 million or more per year. Right now we’re down to about six and a half, seven months’ inventory.”
- “William Strauss, senior economist at the Federal Reserve Bank of Chicago, said that though he sees a growth in housing production, he foresees a potential shortage in housing units.”
- MIT economist William Wheaton has come up with similar figures. ‘If we conservatively add 200,000 demolitions per year, the US economy will need at least 1.25 million new units yearly in the near future.
What is the real number? Is it 1.25m or 28% larger than that at 1.6+ million homes?
Government figures show we net one person growth every 11 seconds (about 1% annually against a population of 3.07m) and an average of 2.59 people per household, we need 1,106,915 more homes this year.
I am inclined to go with the estimate by Wheaton at 1.25m. Now, working back to 2000 using housing permits, we get the following chart:
Housing Permits vs Population Need
* Charts show permits vs actual units built. I don’t have the completion counts or ratio, but even if only 80% reach completion, there is a problem.
We have been over producing for many years. I have to assume for at least several years prior to the beginning of this chart in 2000, we were also over producing homes.
If you only look at the current year, it could look like we are going to have a shortage very quickly as Wesbury claims. However, when you look at the cumulative effects, you can see that years of over production have left us with:
If these calculations are right then we have approximately three years (not six months) of excess housing. But, remember, there is still new construction occurring. If we can keep the new housing construction at about half the growth need would indicate, then in about six years we'll be on track with the right amount of total housing.
6 years – not 6 months
Now, surely not as many units were built as there were permits. So, it is probably something less than 6-years, but I seriously doubt it could possibly be as short at 6 months.
Of course, housing needs are not uniform as job and economic growth and population migration vary.
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