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New Home Starts versus Population Growth: Why we aren’t in a Bubble
J.W. Colvin IV / Metrostudy / May 29, 2013
I recently read an article in a local business paper that had an eye catching front page headline,“Another Housing Bubble?” I admit I read the article the first time with a bias, but then I wanted to stack up the facts and see where we were at. The article highlights two different points of view. One view was from a couple of industry watchers and the other from a new home buyer in the market. Among the industry watchers there was some skepticism based on population growth and a little disbelief at how quickly ‘speculative’ home building has rebounded, but the home buyer was exasperated because he had very few options to choose from. If we are in an overbuilt situation, then how can we have home buyers who can’t find new homes to purchase? Here are my thoughts.
New single family home construction is not outpacing population growth. According to the Census Bureau, at the beginning of 2010 the area we define as the Triangle (Orange, Durham, Chatham, Wake, Johnston, Franklin, Granville, and Vance Counties) had 655,701 households, and was expected to grow on average 1.7% per year from 2010 to 2013 to 690,513 households, a gain of 34,812 households. Historically, 39% of new households generate increased demand for multifamily dwellings, with the remaining 61% moving into single family dwellings. This would mean that from the beginning of 2010 to
March of 2013, the Triangle should have added approximately 21,235 new single family homes to meet new household demand. Our survey of new single family construction shows 20,346 new home starts from January 2010 to March 2013. We survey demand in the form of new home occupancy as well, which we believe is the best measure of demand, and a great measure of population growth. During that same time line (Jan. ’10 – Mar. ’13) 20,787 formerly unoccupied, newly constructed homes became occupied. This means we actually didn’t build enough homes in that time period to meet demand, and new home buyers had to look to remnants of the housing crash for new home shelter. The rest had to stay in apartments or in their current residences, i.e. delaying their decision to purchase a new home.