US Residential Housing

According to various analysts quoted by the FTD, the US needs 1.5 - 2 mio new housing units per year due to its population growth. At the moment, annualised housing starts are only around 600,000, i.e. much lower than equilibrium demand. But as 1.8 mio units are currently vacant, there's still 1 year's supply on the market that needs to fill up before demand for housing starts will increase again.

Let's see:

- 600,000 is roughly equal to Germany's annual housing starts on a per capita basis.

- But of course US population has been growing at 1 % p.a., whereas Germany's population has barely stayed constant, so it is reasonable to assume that the US has a much higher demand for new housing on a per capita basis.

- 1 % population growth equals 3 mio people. Assuming 2 people per household implies a demand of 1.5 mio. units.

- However, roughly half of America's population growth is due to immigration. While no hard data is available, net immigration has probably gone down sharply in 2008, and will not recover anytime soon. In particular, construction-related jobs used to be filled by unskilled Mexicans, and those jobs have gone. And potential newcomers have less incentive to come, because they won't be able to find jobs.

- Assuming that short-term population growth is down to 2 mio people, that would lower yearly housing demand to 1 mio units. In other words, current available supply of 1.8 mio units would last two years, not just one year.

- And that doesn't yet factor in that demand also has something to do with the ability to pay rent or take out a mortgage: With unemployment swelling rapidly, and tent cities filling up all over the Southwest, it seems like actual demand (i.e. demand backed up by the ability to pay) will be considerably lower than 1 mio units for the foreseeable future.

Summing up: While US housing starts are now so low that they probably won't fall further, it seems unlikely that there will be a strong and sustainable rebound any time soon.