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Could There be an Upcoming Housing Shortage?

June 10, 2011

With all of the investors currently out there, will there be enough homes for sale to meet demand? Here in Fort Collins and Loveland, it is basically a seller’s market these days. Over the next decade, 16 million new housing unites will be needed nationally to meet growth and shifting demands. What does this mean? Housing growth will need to reverse its latest trends to meet the forecasted spike in demand. From 2007-2010, household growth averaged about 500,000 per year–less than half the 1.2 million annual pace averaged prior from 2000-2007. At this point, a more normal rate of household formation will be needed to absorb the current rate of foreclosures and distressed homes that are currently plaguing the markets. However, young adults have put off home ownership and immigration has slowed, this has pretty much stalled household growth. Less people want to sell with the current market conditions, so new home production is needed. Over the longer term, the number of younger households is set to rise sharply which will support growth in the population and subsequently fuel growth in both new renters and first-time buyers. The path of the economy and evolution of the mortgage market will determine when and if this increased demand materializes.

There will be a need for greater housing units for several reasons. Projected demand for 1 million new homes a year is needed to meet population growth in the coming decade. A surge in smaller homes, estimating that 3.8 million baby boomers will be looking to downsize their homes within the next decade. Also in adding to the increase in housing units needed, Immigration growth, the need to replace existing homes, and demand for second homes will contribute to rising demand. Investors who are purchasing numerous homes are also creating demand as rental markets tighten. However, when prospective homeowners start their search there will be less options on the market, unless these investors note the change and attempt to get out of their cash-flowing properties. All these reasons help researchers conclude that at least 16 million new housing units will be needed over the next decade.

How is the market in your area? Is it tightening up? Do you feel as though there will be a turn around in the near future?

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