New research by NAHB economists Robert Denk and Paul Emrath highlights the significant extent to which much of the U.S. single-family housing market is underbuilt following the severe decline in production that has taken place since 2006. This “underbuilt” condition is present in the sense that excess or pent-up demand for new construction exists, compared to the long-run trend we would expect if housing, labor and credit markets were functioning normally and generating a normal rate of household formations.
Focusing on single-family building permit data, the report shows that, while overbuilding did occur to a significant extent through the end of 2005, this condition was worked off soon afterward by record low rates of production that dropped to a million units per year below trend (see Figure 3 below). The findings suggest that the underbuilding represents a significant pent-up demand that will at some point need to be worked off and begin to affect single-family housing production in a positive direction.
Dear Robert and Paul,
Your research makes a significant contribution the the value of an NAHB membership. I saw some demographic data about the aging of the U.S. population and I apologize that I cannot find the exact source however the facts were unforgettable. In 1990 the ratio of the U.S. population in the over 55 age group to the 25 – 40 age group was 3:1; in 2000 the ration was 3.5:1, in 2010 it has jumped to 5:1. This does not bode well for housing surpluses.