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Causes of the Housing Bust Part I: Excess Growth July 8, 2009

Posted by John Watch in AccuriZ Reports.
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Housing Growth vs. Population Growth

Housing Growth vs. Population Growth

Reported from Housing In Crisis Report

Excess growth in the housing market was a key factor in the economic downturn that we are now trying to recover from, according to the latest market report by AccuriZ. The report, entitiled Housing In Crisis, indicates that a huge surge in home construction since 2000 was not supported by the natural population growth cycle at the same time. This excerpt explains the chart above;

“Household size appears to be fairly stable at 2.7 for the past thirty years. Applying the average household size of 2.7 with the growth in housing units of 15.1, the population would have increased by 40 million since 2000 versus the actual growth of 25 million as reported by the Census Bureau.”

Given the property data, the supply and demand factor of the housing market was severly imbalanced, as there were simply too many homes being built without enough people to fill them. From 2000 to 2008, 15.1 million units were built, based on public records. While this complies with historical trends of housing starts in previous decades, this surge occured within an 8 year span.

“Correlating census estimates with existing occupied housing unit data, one can surmise that the actual number of housing units developed over the past eight years exceeded market demand by 600,000 units per year since 2000. Applying the results of this analysis and considering natural building permit activity, one could conclude that the existing over supply of housing will take no less than two years to be absorbed, possibly longer in areas with extensive over development.”

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