Most studies show that new home construction must stay at around 1.6 Million homes/year to keep up with population increases and replace dem0lished properties. In 2008, there were about 900,000 housing starts. In 2009, that number dropped to 550,000. It’s expected that 2010 will end up around 700,000.
The good news is that with the low new housing production, and if we can work through the foreclosure inventory, equity sellers (those who own their home and have some equity) might see a rise in home prices. After all, a shortage of homes is the way to move from a buyer’s market to a seller’s market. The big question is: When things start turning, how fast will new home builders jump in to fill the void? We all know financing may be tough for those builders. So, if they can’t get financing, new home starts will be slow.
On the other hand, corporations are hoarding cash right now to hedge against inflation. If inflation turns out to be less than expected (we’ll see what oil prices do), maybe these corporations will fill the cash void and invest with new home builders.
The bottom line is, like all things having to do with the economy: Nobody really knows what the future holds.