Nationally, there is a solid foundation for home building to recover from the recent downturn. For years, home builders have been trailing new family formation, trying to play catch up. Looking toward the future, family formations have been rising at a rate of 1.5% a year, notably the fastest rate since the 70s. This already defined demand for new housing is key in the industry’s recovery, according to Forbes. Though home prices have taken a dip, it is predicted that the demand may cause prices to surge and the future looks like one filled with active buying and construction.
Now that the economy has begun to re-open, it is worth taking a look at how ready its elements are for growth. It is especially encouraging that home building has a firm basis on which to recover from the recent troubles, not in every city and region, of course, but nationally. Critical is the implicit backlog in the demand for new homes. Residential construction for years now, not just during the quarantines and lockdowns, has trailed new family formation. Especially considering that a portion of the existing housing stock depreciates physically each year, it looks as thought home building after the virus subsides will begin to stage a significant catch up. Home prices may rise as a reflection of the relative shortage, but in general the picture of this future is one of active buying and construction, hopefully sooner than later.
For years before Covid-19 took over all the news, media frequently dwelt on how millennials have postponed forming families, pointing to the many who seem content in their parents’ basements. But for all the anecdotes of young men or women who cannot or will not leave home and speculation on why they are that way, the statistical record says something very different.