4 ms·

What matters above all is number of households relative to housing units, and rate of expansion/contraction of households. Household growth was flat prepandemi

What matters above all is number of households relative to housing units, and rate of expansion/contraction of households. Household growth was flat prepandemic https://fred.stlouisfed.org/series/TTLHH https://fred.stlouisfed.org/series/TTLHH The likely explanation for current RE market is households temporarily expanded due to the various stimulus and forbearances giving many higher disposable income, but we'll likely see this contract again as the effect of inflation takes hold. (Expanding/contracting can be through roommates splitting/joining, kids moving out etc). Housing is fungible. Rental units draw from buy demand and vice versa. Substitutable goods work this way on a macro scale. The millenials who buy, move out of rentals, which drives rents down (or less growth), increasing the spread between carrying cost to rent/own. There's a limit to how far this spread can widen nationally. You can't look at these markets independently. Number of households show the actual number of housing units demanded, everything else is an input to number of households.

nostrademons 4y ago
If housing is supply bound - which we know it is, because prices are rising - then rate of household growth is going to equal rate of new home construction, because you can't form those households until there's a house for them to move into. Which it does - compare your link with my census.gov link on new residential construction. Everyone who doesn't have a home has to double up with roommates or continue living with their parents If the question is "Can I maintain the same standard of living as I grew up with?" or "Can I form a family?" or "What are housing prices going to do now?", this isn't an interesting statistic. The number you want to know is "How many people would like to form households but can't because there are no houses to be had?" And that's what I'm citing with the demographic numbers. If there are twice as many people desiring houses as houses available for them, only half the population is going to get a home, and the price that the median home sells for will be what the 75th percentile of the income distribution can support.
- adam_arthur 4y ago
  "Supply" as in inventory is a totally different concept from the actual structural supply of housing. To say housing is supply bound is simply wrong. Inventory is low now and will be high in 6-12 months. To extrapolate out permanent conclusions from a point in time inventory metric is completely flawed analysis. I'll refer you to the generationally low inventory in the 2000s, coupled with similar widespread shortage narratives. It won't end via the same mechanism, but each bubble is unique. Inventory will continue to rapidly increase as rates stay over 5% And again, rate of construction relative to population growth is at an all time high. Every narrative around a supply shortage focused on inventory is clearly and obviously flawed/wrong
  - tmnvix 4y ago
    I think it's sometimes hard for people to accept that the difference between inventory and supply can fluctuate. The simplistic view is that residences are either rented out or occupied by the owner. In reality a speculative boom creates excessive demand which increases the number of residences that are second homes, Airbnb's, undergoing renovation, on the market, land-banked, etc. Most of this is made possible as capital gains become more significant relative to yields. It's counterintuitive but a speculative boom can lead to both higher prices and a higher proportion of underutilised residences.
    - nostrademons 4y ago
      I'm talking about supply as in physical supply of houses, not inventory. Inventory is a less-useful concept for me, because it fluctuates based on who decides to put their house on the market at a given time, which can depend upon home prices, interest rates, migration patterns, speculation, etc. I still have not seen a convincing response to the demographic argument I put forth. The generation entering the housing market now is the large Millennial generation; the generation dying is the small Silent generation. For everyone who wants a house to get one, we need to be building the delta in size between these, and we're short by several million.
      - remarkEon 4y ago

nostrademons 4y ago

If housing is supply bound - which we know it is, because prices are rising - then rate of household growth is going to equal rate of new home construction, because you can't form those households until there's a house for them to move into. Which it does - compare your link with my census.gov link on new residential construction. Everyone who doesn't have a home has to double up with roommates or continue living with their parents If the question is "Can I maintain the same standard of living as I grew up with?" or "Can I form a family?" or "What are housing prices going to do now?", this isn't an interesting statistic. The number you want to know is "How many people would like to form households but can't because there are no houses to be had?" And that's what I'm citing with the demographic numbers. If there are twice as many people desiring houses as houses available for them, only half the population is going to get a home, and the price that the median home sells for will be what the 75th percentile of the income distribution can support.

adam_arthur 4y ago
"Supply" as in inventory is a totally different concept from the actual structural supply of housing. To say housing is supply bound is simply wrong. Inventory is low now and will be high in 6-12 months. To extrapolate out permanent conclusions from a point in time inventory metric is completely flawed analysis. I'll refer you to the generationally low inventory in the 2000s, coupled with similar widespread shortage narratives. It won't end via the same mechanism, but each bubble is unique. Inventory will continue to rapidly increase as rates stay over 5% And again, rate of construction relative to population growth is at an all time high. Every narrative around a supply shortage focused on inventory is clearly and obviously flawed/wrong
- tmnvix 4y ago
  I think it's sometimes hard for people to accept that the difference between inventory and supply can fluctuate. The simplistic view is that residences are either rented out or occupied by the owner. In reality a speculative boom creates excessive demand which increases the number of residences that are second homes, Airbnb's, undergoing renovation, on the market, land-banked, etc. Most of this is made possible as capital gains become more significant relative to yields. It's counterintuitive but a speculative boom can lead to both higher prices and a higher proportion of underutilised residences.
  - nostrademons 4y ago
    I'm talking about supply as in physical supply of houses, not inventory. Inventory is a less-useful concept for me, because it fluctuates based on who decides to put their house on the market at a given time, which can depend upon home prices, interest rates, migration patterns, speculation, etc. I still have not seen a convincing response to the demographic argument I put forth. The generation entering the housing market now is the large Millennial generation; the generation dying is the small Silent generation. For everyone who wants a house to get one, we need to be building the delta in size between these, and we're short by several million.
    - remarkEon 4y ago