Harvard and Housing: A Silver Lining?


How about a silver lining in the housing crisis? According to the Harvard Joint Center for Housing Studies’ “State of the Nation’s Housing 2008,” things are bad now, but social trends will save the day. I spoke with the executive director of the Center, Eric Belsky. He said:

There are still some very fundamental forces that would drive housing demand moving forward. One is the significant amount of immigration that we've seen over the last ten or fifteen years. In addition we have the children of the baby boomers entering household forming years. All of this gives some support to the housing market.

The study also talks about people getting married later and divorced more often, making single-person households the fastest growing type. It predicts that in the next decade household formation will grow by an average 1.4 million per year. Good news, right?

Yes for home sales and prices, but I wonder about the builders. At a conference last week, I saw a chart of housing starts from 1972 to today. Starts were actually really high at the beginning of ’72, at 2.5 million units. Even during the boom in 2004, starts didn’t go past about 2.3 million units. Of course now we’re under a million, but we’re talking about the future.


Starts will obviously rise again, but the unique nature of this particular housing crash, the fact that it was not precipitated by greater economic factors but by overbuilding and faulty mortgage products, flies in the face of a full and speedy recovery for builders. Foreclosed properties are not just old homes now, but new properties, competing with never-sold properties. It will, I believe, take far longer for the new home market to recover than the existing home market.

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