Unleashing of Pent-up Household Formation Demand Will Be the Cause
Yes, you read that right; get ready for the next housing boom. You’re probably thinking, “How could that be with all the mortgage delinquencies and foreclosures going on, and the record levels of housing inventory? Well, it’s not going to happen soon – [probably] not for several more years – but it’s coming. [Let me explain to you why it is inevitable.] Words: 589
So says Vahan Janjigian (http://janjigian.blogspot.com/) in an article* which Lorimer Wilson, editor of www.munKNEE.com (It’s all about Money!), has further edited ([ ]), abridged (…) and reformatted below for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement. Janjigian goes on to say:
As society creates more households, society needs more houses but, right now, due to the poor economy and the dismal jobs market, household formation is on hold. This is one reason why the housing market continues to remain depressed. Nevertheless, despite all the problems we are seeing today, pent-up demand [for housing] will create the next housing boom…
A household is simply a residential unit. It refers to a person or persons living under one roof. Traditionally, a household has been thought of as a nuclear family. Boy meets girl, boy marries girl, boy and girl buy a house or rent an apartment. In this way, marriage creates more households and demand for more places to live. Divorce, too, creates more households and demand for more housing. People who get divorced do not want to continue living together under the same roof. Households are also formed when children grow up and move out. Most kids can’t wait to get their own place.
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However, much of this activity is currently on hold…Due to the poor economy, some people are postponing marriage. Others are postponing divorce and, as much as they would like to be independent, many grown children are staying put. Some can’t find jobs even after graduating from college, so they are choosing to live with mom and dad just a little longer. Even those lucky enough to be employed are moving in with their parents in order to cut expenses.
Believe it or not, this lack of household formation could be good news for housing in the long run. It means there is a lot of pent-up demand for housing, and chances are it is growing. Current household formation may be depressed, yet potential household demand is strong.
Once the economy begins to pick up steam and more people start to find jobs, household formation will surge. Once that happens, demand for houses and apartments will also surge…
Price:Rent Ratio Suggests House Prices Have Further to Fall http://www.munknee.com/2011/05/pricerent-ratio-suggests-house-prices-have-further-to-fall/
In Foreclosure? Don’t Worry! Your Bank Probably Can’t Prove They Own Your Mortgage! http://www.munknee.com/2010/10/in-foreclosure-dont-worry-your-bank-probably-cant-prove-they-own-your-mortgage/
Housing Crash Continues: Why Now Is NOT The Time To Buy! http://www.munknee.com/2010/09/housing-crash-continues-why-now-is-not-the-time-to-buy/
Ever Increasing Foreclosures Mean Low House Prices for Many More Years http://www.munknee.com/2010/04/ever-increasing-foreclosures-mean-even-lower-house-prices-for-many-years/
U.S. Real Estate? Fuhgeddaboudit for Another 5 Years! http://www.munknee.com/2010/02/5-more-years-of-lower-real-estate-prices/
The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
Permission to reprint in whole or in part is gladly granted, provided full credit is given as per paragraph 2 above.