The birth rate in America has been on a long-term decline as people are deciding to have fewer babies and at a later age. The most recently available data shows the lowest birth rate in the U.S. modern history. But due to the overall rise in the number of child bearing years over time, the actual number of live births in the U.S. has been fairly steady at around 4 million each year.
There are 4 million births each year. There are also about 2 million deaths each year. So the natural process is yielding a gain of about 2 million in population. In addition, immigration makes up another ½ million to one million each year. The total U.S. population, therefore, rises by roughly 3 million each year.
Nothing can be simpler to understand than the fact that more people mean more housing demand. To accommodate the rising population, about 1.5 million new housing units need to be built each year (including the need to replace demolished units). Unfortunately, housing starts have averaged only 766,000 per year from the economic downturn in 2008 to 2014 (7 consecutive years). These multiple years of undersupply compared to what is needed is the reason why much of the country is experiencing a housing shortage with few inventory of homes for sale and falling apartment vacancy rates. Consequently, rents and home prices are rising by at least twice as fast as wage growth.
Housing starts have to kick higher soon. Otherwise housing shortage will continue. Housing affordability will take a hit as a result.
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