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The sharp rise in property prices over the past year has prompted many to wonder whether residential construction is not sustainable. I didn’t think about it, and in November 2018 I wrote the Housing Forecast: Not a bubble in 2019. This update shows that housing construction will continue to decline, albeit not as strongly as previously expected.
The most important factor for housing construction and pricing is the demographic situation. The apartments are mainly built for new residents; only a small new building replaces destroyed or abandoned apartments. My first dimension of the housing market is construction as a function of population growth. The diagram opposite shows how many new housing units were built per 100 inhabitants. New residents appear above the mortality rate at birth, plus net foreign immigration. Population data include estimates of illegal immigration, although there appears to be some uncertainty.
This ratio shows that we are on the verge of building exactly the amount of new buildings, single-family homes and multi-family homes that is needed. This is a measure of low loyalty and ignores factors such as the transport of mobile homes, the demolition of houses and abandoned houses in rural areas as the population migrates to cities. But the question is whether we are rebuilt or underbuilt.
The key to this timetable is the slow growth of the population in recent years. Population growth in the United States last year was the lowest percentage increase since 1937. Many in the forestry industry believe that 1.5 million housing units are beginning to function normally, but that was when population growth was much faster. Today, 1.1 million housing units are a normal year, and in 2018 we built 1.2 million housing units, although there was a downward trend in the second half of the year.