Natural Population Growth and Housing Demand

When people talk about housing and the value of homes often what is left out of the discussion is the long-term look at population growth. Los Angeles, Beverly Hills, West Hollywood are all top destinations from around the world. So as our overall population grows the demand will continue for housing. In the most basic analysis of economics our supply of housing is relatively fixed, as approval for high-density housing is a long arduous process that most likely will not keep up with the increasing demand and desired living here in LA. The article that follows elaborate at length on the population growth expected in the years to come.

Article published on September 9, 2011, in Economist Commentaries, by Lawrence Yun, Chief Economist

The current home sales activity is matching levels seen 12 years ago, yet the total population has increased by more than 30 million since then.  The rise in population does not always mean a proportional rise in housing demand if people double and triple-up.  That is, there is no housing demand if additional roommates are acquired and young adults move back in with their parents.  Still, a clear-cut mismatch is arising between home sales and population, and this mismatch cannot continue indefinitely.  There is a limit to the number of roommates it is possible to have, and parents and kids will get on each other’s nerves at some point.  Thus the mismatch can be viewed as a source of future housing demand.

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