Housing Bull

I am bullish on housing.  I say this as someone who was a housing bear through much of the early 2000s.  My bullishness is based on a couple of simple premises, mainly that low new housing stock, falling existing housing supply, and improved employment will boost housing demand and home prices.  The last four years have had the lowest number of housing units added in any years since 1990 (which is as far back as the data I saw went).  Before 2009 there had never been less than 1 million units added annually.  Only 425,000 new units will be added to existing housing stock in 2011, which is the lowest of any of the last twenty years.  I encourage you to look at this post from Calculated Risk, and I have copied the table below: 

Housing Units added to Stock (000s)
	1 to 4 Units	5+ Units	Manufactured Homes	Sub-Total	Demolitions / Scrappage	Total added to Stock
1990	1010.8	297.3	188.3	1496.4	200	1296.4
1991	874.4	216.6	170.9	1261.9	200	1061.9
1992	999.7	158	210.5	1368.2	200	1168.2
1993	1065.7	127.1	254.3	1447.1	200	1247.1
1994	1192.1	154.9	303.9	1650.9	200	1450.9
1995	1100.2	212.4	339.9	1652.5	200	1452.5
1996	1161.6	251.3	363.3	1776.2	200	1576.2
1997	1153.4	247.1	353.7	1754.2	200	1554.2
1998	1200.3	273.9	373.1	1847.3	200	1647.3
1999	1305.6	299.3	348.1	1953	200	1753
2000	1269.1	304.7	250.4	1824.2	200	1624.2
2001	1289.8	281	193.1	1763.9	200	1563.9
2002	1360.1	288.2	168.5	1816.8	200	1616.8
2003	1417.8	260.8	130.8	1809.4	200	1609.4
2004	1555	286.9	130.7	1972.6	200	1772.6
2005	1673.4	258	146.8	2078.2	200	1878.2
2006	1695.3	284.2	117.3	2096.8	200	1896.8
2007	1249.8	253	95.7	1598.5	200	1398.5
2008	842.5	277.2	81.9	1201.6	200	1001.6
2009	534.6	259.8	49.8	844.2	150	694.2
2010	505.2	146.5	50	701.7	150	551.7
2011 (est)	430	126	46	602	150	452

Over the past four years the number of multifamily units made up a larger percentage of the total number of housing units than in previous years, which means that an even fewer number of single family homes were built than in the early- and mid-2000s.

I know there was large increase in housing units since 1990, but the drop from the 2006 peak has been precipitous.  Demand from population growth, new family creation, and people who moved home or in with roommates over the past few years and now are able to move back on their own will reduce exisitng supply.  Supply is at 7.5 months, the lowest level since mid-2005.

National employment figures have been improving monthly.  The housing market will not fully recover until employment improves.  Due to the lack of new units and low supply of exisitng homes, a continued improvement in employment will be felt quickly in the housing market.   If you throw in near historic low mortgage rates (3.77% for a thirty-year mortgage), the housing bull story gets even stronger.