With recent statistics noting “air pockets” in the post-recession, stuttering economic recovery, new doubts are being cast on the future of America’s housing comeback. On a year-to-year basis, the expansion of additional residential construction seems to have plodded ahead at a low double digit rate, with expectations of a forthcoming pickup, even if that rate is modest by previous standards.
But even such moderate expectations have lately been giving way to new fears of reversal as the upcoming fiscal year, and its problems of debt ceilings, Obamacare, and budget deficits begin to take center stage. Pessimists are even hinting at a reversal of the current construction level that has barely reached one-third of the 1.7 million new housing starts that had become routine by the early part of the last decade.
Logical analysis would indicate that neither the new pessimism nor belief in the return to the housing’s “golden days” are in the cards. However, considering a 320 million U.S. population, a doubling from the middle 1900′s, continues to necessitate modern residential facades, inclusive of the latest accommodation construction progress has made available in the areas of power generation, heating, air conditioning and physical expansion.
This will require a reasonable annual level of new housing starts, upgrading, and expansion to service a population that will likely reach 360 million by the 21st century’s mid-term. A reasonable volume expectation will likely call for annualized housing starts of close to 1 million, eventually, but 700,000 for now. Changing economic and financial circumstances of America’s dramatic population values indicate the following:
1) The lifetime asset focus of home ownership has been rapidly replaced by long-term leasing, or even multi-monthly rental. The increased malaise of a chronically underemployed labor force adds to the critical importance of the need for geographical mobility to areas of employment needs.
2) Although record-low mortgage rates, now rising, have been accompanied by stiffer financial institutional credit requirements, the days of making home ownership an entitlement by virtue of “Affirmative Action,” backed by Fannie Mae and Freddie Mac are likely gone for the foreseeable future.
3) With trillions of dollars of excess funds reposing on the bottom lines of banks and corporations, foreign investments by private, as well as government funds are increasingly focusing on U.S. residential and commercial buildings. This has been especially true of China and Canada, whose strong currency and supplemental residential interest will continue to make these future allocations attractive; and lending support to projected future domestic construction and expansion for some time to come.
4) Although the extent of America’s future economic recovery will play a vital role in the ultimate extent of the building industry, the combination of positive factors, herein cited, puts a solid platform under the current residential and commercial construction sector.
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