Population Growth: Jobs Needed vs. Housing Needed

With all the talk about job creation and high unemployment lately, I read an interesting fact today; with the existing population growth an estimated 90,000 jobs need to be created each month just to keep the unemployment number where it is today (9.2%).  That’s an impressive number of jobs being created in a lackluster recovery just to break even.  After reading this, I started thinking about population growth’s impact on the housing market.

To keep up with population, an estimated 1.6 million new homes need to be built every year.  This includes 1.4 million strictly from growth and an estimated 200,000 from fires, tear downs, etc.  We need to be building 133,333 home per month, every month to meet this demand.  According to the May report from the Census Bureau we’re on pace for 560,000 homes this year or 46,667 per month.  The deficit is 86,666 homes per month.  To give some perspective, the US population grew by 28 million people in the last decade!

According to CoreLogic’s Shadow Inventory Report (Q1 2011) there were an estimated 1.8 million homes in the shadow, down from 2 million 1 year earlier.   The National Association of Realtors estimates that 3.72 million homes are available and on the market.   While the total of 5.5 million homes is staggering, the number has been as high as 6.5 million.

A health market doesn’t rely on the number of homes but rather the supply in a number of months of available inventory.  Typically a market that has 6 months or less of supply is considered healthy.  Currently there is over a 9 month supply of homes on the market.  This number is working down and is off nearly 25% from peak supply suggestion solid absorption of excess inventory.  The lack of building is no doubt helping this and we’ll likely see this accelerate as vacancy rates are plummeting and the second home market is picking up.

I know it seems impossible to comprehend but I believe we’ll be in a health market in 12 months with a tightening supply in many markets in the US.