Why The Housing Market Is Ready To Boom



In the run-up to the financial crisis, the number of homes built within the US surged to over 2 million and it has taken some time for this ‘overbuild’ to work its way out of the system. According to additional Newgate research, the average build over the past seven years has been just 850,000 per annum. This below average annual build is fair considering the housing overbuild prior to the global financial crisis. However, now data from the US Census now shows that this ‘overbuild’ has been almost completely eliminated and the market has moved into a shortage of 700,000 houses.


But why hasn’t the additional demand emerged for new units if the housing market is technically in shortage? Newgate proposes that ‘weak household formation’ is to blame for a lack of demand:

“We argue that these alternative living arrangements are temporary. The natural human desire for independence and to start a family – combined with supportive economic conditions – should see household formation recover.”

“If we assume household formation increases back to more normal levels, we would expect an increase in demand for one million new houses. This is in addition to the natural annual demand for housing of 1.5 to 2.0 million houses per annum.



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