But some may have a hard time ramping up supply even if they want to. As The Wall Street Journal noted last week:
Most builders responding to a recent survey released Wednesday by the National Association of Home Builders noted that lots ready for construction remain in short supply, and that scarcity is among the chief factors hindering the housing recovery.
Homebuilding CEOs have been clear in recent conference calls: There are far too few homes given demographic demand. As Lennar Corporation (NYSE:LEN) CEO Stuart Miller put it, “The bottom line is that there are too few dwellings for a growing population and for normalized household formation.”
3. Pent-up household formation demand
21.6 million Americans age 18-31 live with their parents, according to Pew Research Center. That’s a record, and up from 18.5 million in 2007.
There are two ways to look at this: Either it’s a new normal that reduces long-term demand for housing, or it’s a short-term function of the Great Recession that will return to normal once the economy picks up. I’d bet on the latter. And when jobs growth returns and household formation picks up — it’s still below its long-term trend — demand for homes will rise as well. Like so many other statistics, the glut of young people living in their parents’ basements is both depressing and a reminder of how far things have to go before we’re back to normal.
From more on what to expect from the housing market in the long run, see here.
The article What Will Put the Brakes on Housing originally appeared on Fool.com and is written by Morgan Housel.
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