Household Formations EXCEED Home Completions (GREAT NEWS FOR NERVOUS HOMEBUYERS)
The media loves to beat the “Housing Crash Coming Soon” drums!
And that, unfortunately, is keeping all too many homebuyers on the sidelines – for no reason!
As a result, I like to push back with our own data – or in this case, Barry Habib’s data (from MBS Highway).
The biggest driver of housing prices is simply demand vs. supply.
And – if demand exceeds supply, prices will likely continue to rise.
Mr. Habib likes to remind people of this:
There are approximately 1.4 million new households formed every year in the U.S. (like when a kid moves out of his parents’ home)
BUT – there are only about 1.2 million new homes completed every year.
So, in the short run, we could see housing slow down or even correct.
But – in the long run, this 200,000-per-year demand/supply imbalance will invariably lead to upward price pressure – and that bodes extremely well for the housing market overall.
So, if buyers are already buying a home – for better schools; for proximity to employment; for the ability to fix up the home and make it their own; for an inflation hedge; for a retirement nest egg; for a way to avoid constantly rising rent payments; and/or for a yard for their kids and pets; they might also want to buy for the investment opportunity too because it is very likely that prices will continue to rise in the long run.
Here is a final quick point for renters: This same demand/supply imbalance will continue to push up rents too – so sitting on the fence could get very expensive.
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