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Originally Posted by aceventura3
The US population is going to grow by about 30 million people in the next seven years.
Using an average of 4 per household, we will need to build 7.5 million new homes in the next 7 years simply to keep pace with projected population growth.
If we factor in homes needing replacement/second homes for baby boomers/vacation homes/and Oprah, I guess we would need to build close to 1.25 to 2 million homes per year.
With that kind of demand in the face of limited land resources and increasing slow or no growth cities, I don't see how we could have a prolong stall in real estate.
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The problem is not necessarily in demand, but in the ability to buy. Higher interest rates and an end to easy mortgage credit, if it comes to that, will reduce the ability of people to pay high prices.
What happens then? What's alread happening: an increase in renters. More housing might be built, but as rental housing by developers with deep pockets who are looking for a good cash flow instead of shorter-term appreciation. More apartment complexes might be built, more houses acquired as rental property (perhaps then subdivided or with "gramma" units added in the back yard, etc.)
Additionally, what homebuilding there is might trend away from megahomes to smaller, more affordable developments. There's even a trend called the generational home, where a couple starts out with a small house and gradually adds a wing here and there for the children they have, then for the grown children to live in, and so on.
I will not argue that more capacity isn't needed, but it may show up in a different form (and based on a different business model) than we have come to expect, and with an emphasis on lower price and greater affordability in the face of higher interest rates.