Supply & Demand

A recent Q&A from the Marin IJ featured the following information:
"Between 2000 and 2006, California's population increased 7.6 percent. During the same time period, housing units increased 6.3 percent. When you are talking about a population of 30 million people, a discrepancy of even 1 percent in available housing means there are 300,000 more people competing for a place to live.

"Again according to the Census Bureau, in California we have an average of 2.9 people per household. If you call three people a household, there were still 100,000 more housing units needed..."

While we at Next Generation Real Estate are not census takers, we believe it's safe to assume that the population growth rate will continue to be strong. If anything, however, housing starts have fallen off dramatically in 2007. Normally this would be a sign of broader economic decline. But that's what makes this market downturn so unusual.

Historically, real estate suffers as a result of broader economic troubles. Layoffs, inflation, and high unemployment cause corrections in the national real estate market. This time around, however, those traditonal problems were not the driving force behind the correction.

So we're left to wonder...with interest rates, inflation, and unemployment all relatively low, how long can the correction last? With the decline in new construction, is it possible that demand may outstrip supply by an even greater margin than before? Could the national market come roaring back to its 2005 heights? Stranger things have happened.