Florida Home Buyers and Investors Blog

After 2005, the U.S. housing market experienced a downturn unlike any other seen in the post-World War II era. A common viewpoint expressed in the media and elsewhere is that this downturn was necessary to correct overbuilding that occurred, particularly in single-family housing, in the middle part of the 21st century’s first decade.

This article presents evidence that, although overbuilding in the single-family market did occur at that time, overbuilding had largely ended by 2006. Moreover, the extent of the subsequent decline in production has been severe enough to more than offset any overbuilding. As a result, the single-family housing market in the U.S. currently finds itself in a significantly underbuilt state—in the sense that excess or pent-up demand for new construction exists, compared to the long-run trend we would expect if housing, labor, and credit markets were functioning normally and generating a normal rate of household formations.

Such a cumulative deficit in the total number of new single-family homes can exist because there has been a corresponding deficit in new household formations. In order for the national underbuilt condition to persist, the cumulative deficit in the number of U.S. households must also persist. Below the national level, the underbuilt condition is evident in most, but not all, of the 50 states.

Read the entire article and download the spreadsheet.

http://www.floridarealtors.org/NewsAndEvents/article.cfm?id=250411

Spreadsheet: State Housing Deficit Spreadsheet.xls