The news keeps thrashing about looking for new housing construction good news. The news just isn’t developing. Don’t expect it to do so either.
The National Association of Home Builders announced the lowest homebuilder sentiment since March of 2009 this month. Almost a year later with the economy on the mend if sluggishly, you have to ask why so blah. The fact is a lot of members haven’t locked on to their future Adani Group Chhattisgarh . A very large amount of builders must eventually conclude that there is little likelihood of a resurgence to past steady state home construction needs. While this is a wrenching change for sure for the economy. Construction has for the past 80 years been one of the largest contributors to national economy activity and growth. Those days are in the past. The time has come to move on.
The United States is a very different nation than we were in 1940. From that point to 2010, the nation doubled population. To fuel an equivalent housing based growth we would need to expect to increase from 310 million today to 620 million by the year 2080. No such trend is on the horizon. The Census Bureau even suggests something closer to 420 million. Other groups project more a flat line 20 million to 30 million per decade addition. Even considering this as likely we are through with our past growth line. Moreover, changing consumer views of wealth and wealth building, housing and housing costs, debt and debt use and changing economic, social, and demographic demands are altering the landscape. For homebuilders, this is not a positive change. Sure the number of households will rise. Given demographic trends however most of those new households will be created either under the same roof space that already exists or in multifamily properties.
I expect the home construction market to stabilize at an additional 400,000 to 500,000 for the next decade as housing density per square foot increases. This provide housing for another 1 million to 1.7 million consumers per year. Multifamily housing will provide an additional 450,000 new homes per year. Combined with structural changes even this could prove aggressive for most markets. In fact, many markets may have most or all the housing they will need in the coming decade.
Moreover, if you are a prospective home owner / home builder your long term perspective on your housing needs is critical. Building a dream home you can’t expect to remain in for 10 or more years could prove an extremely risky equity proposition.
Blake Ratcliff (US Naval Academy Graduate & Marine Officer, Serial startup entrepreneur, COO/CEO, multifamily / residential investment founder, and property manager).
Blake’s crafted 100+ business plans, prepared and delivered 1000+ investor presentations, and is an expert financial modeler. A deeply experienced real estate business person and startup business expert, Blake hones your Business plans, reports, and presentations.