In spite of high foreclosures and the lingering implications of the housing bubble, could a construction boom be headed our way?
Recent data has suggested that we may face a housing shortage in the near future. Home building declined in the wake of the bubble, but so did the number of new households formed annually. Tough economic times forced people to explore alternative living options such as moving in with relatives or friends. As new jobs are created and the population grows, more people will seek out opportunities to rent or buy.
But what about all the vacancies left in the wake of the housing bubble? Won’t these hold back new construction projects? The short answer is yes although not as significantly as one might think. Banks will be hesitant to provide mortgages to young adults with low wages and short-credit histories. The newly employed will face similar troubles trying to secure a mortgage, due to poor credit or perhaps for having defaulted on earlier mortgages. As more Americans pursue rentals, many affordable multi-family housing structures will be needed. While the lead up to the bubble saw a dramatic rise in the construction of single family homes, the number of multi-family construction projects remained relatively constant. As a result, the current surplus of single-family homes far exceeds that of multi-family homes. The desire for rentals will lead not only to the development of more multi-family housing projects, but also a large number of single-family homes will be converted to rentals.
A rebound in housing construction will require significant growth in the job market. Even with new jobs, a true construction surge will be delayed until the current single-family housing vacancies are filled. Nevertheless, whether by economic prosperity or population growth, the housing shortage will arrive sooner than later and a rebound in home construction along with it.
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