March 21st, 2012 7:24 AM by Nathan Rufty
“Housing will come back – you can be sure of that. Over time, the number of housing units necessarily matches the number of households (after allowing for a normal level of vacancies). For a period of years prior to 2008, however, America added more housing units than households. Inevitably, we ended up with far too many units and the bubble popped with a shook the economy.
Early in a recession, household formations slow, and in 2009 the decrease was dramatic. That devastating supply/demand equation is now reversed: Every day we are creating more households than housing units. People may postpone hitching up during uncertain times, but eventually hormones take over. And while “doubling-up” may be the initial reaction of some during a recession, living with in-laws can quickly lose its allure.
At our current annual pace of 600,000 housing starts – considerably less than the number of new households being formed – buyers and renters are sopping up what’s left of the old oversupply. (This process will run its course at different rates around the country. I believe this is the time to purchase, before interest rates increase and inventory on housing drops below a 6 month supply.
If your are looking to purchase a home, make it quick, when rates increase you will get priced out of the market when demand heats up in upcoming buying season starting in May 2012.