Monday
Mar182013

What is Household formation?


Although new home building has nearly doubled from the bottom of the Recession (i.e. 500K new homes in 2009 to now almost one million) there is still room for improvement.

Why?

Because over time, new housing starts are closely correlated to "household formation".

What is Household formation?  It is the natural growth in the USA from a population that adds more new homes each year through birth, immigration and children moving out on their own.

From 1998 to 2002, the numbers annually for both were about 1.5M.

Today, adjusted for the current population, that number would be $1.82M according to a WSJ article 3-18-13 titled "A lot more recovery before housing bubble redux".

As it relates to private loan investors, the greater the demand for small real estate, the more secure are our 1st loans secured by realty.

America needs more properties not only due to household formation, but also because data I have on file shows that 250K+ old housing is or needs to be destroyed due to age or other conditions.

All the above has positive momentum that the current building trend will continue for some time as we grow our households and recover from the Great Recession.

Until next time
Tobias J Preston, President.

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