Author: William C. Apgar, Jr. and George S. Masnick

Start Page: 267
End Page: 292
Volume: 6
Issue Number: 3
Year: 1991
Publication: Journal of Real Estate Research

Abstract: There is an emergent conventional wisdom that the 1990s will be a decade in which housing markets will suffer a serious and prolonged recession. This wisdom points to the projected declines in new household formations, in fewer young buyers to stimulate trade-up demand because of the aging of the baby bust cohorts born between 1965 and 1974, and overbuilding in some market where vacancy rates remain high. Examination of some simple facts about the sources on new household formation and housing demand, about the nature of supply-side adjustments to swings in housing demand, show this pessimism to be unfounded. Rather than focus only on aggregate national demographic and economic changes, forecasters of housing starts and house price trends need to examine factors that determine long-term supply adjustments, as well as changing household numbers and characteristics in specific housing markets.