In the Wake of the Housing Crisis: A Housing Shortage?

The housing crisis is as much a crisis in finance as it is readjusting supply and demand. In reality, the housing bubble was concentrated in a few states-namely California, Nevada, and Florida-and the contagion spread as the true vulnerability of the subprime mortgage market became apparent. (At one point, subprime and near-prime mortgages accounted for nearly 40 percent of the mortgages originated in the mid-2000s.)

But the housing crisis didn’t stop the formation of households, a key determinant of housing demand. While in the short term household formation may have been delayed, new households continue to form through marriage, natural population growth, immigration, and the maturing of the current population. The demand for new homes will increase as well.

This point is made over at The Business Insider’s “Money Game” blog and Chart of the Day (20 December 2011). Citing congressional testimony by Zelman & Associates, household growth is expected to grow by 10 percent and population by 8 percent this decade. This would likely boost housing starts to a near “normal” 1.5 million housing units per year according to Zelman.