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National Economic Outlook (February 2013)

February 1, 2013 by Marco Santarelli

Home construction rarely matches the actual demand for new homes, which can change quickly – there's often too much or too little. Because the US population grows one percent per year about 1.5 million new homes are needed every year. During the boom of the mid-2000s, two million homes were built per year; at the bottom of the bust, that number was 600,000.

In 2012, construction was up to 800,000 homes. This is a clear indicator that demand is even higher and will continue higher for years. Home prices will be rising even when more construction takes place. The economic effect is self-reinforcing because most of the cost of building a new home is in the wages paid to the workers, who in turn can afford a better home for themselves or spend money on cars and other stuff.

It will take a while, maybe five years, before we get back to building 1.5 million homes per year. During this period the economy will grow at a moderate rate and home prices will steadily increase. After that, things probably will start to get crazy again.

Filed Under: Economy, Housing Market, Real Estate Investing Tagged With: Economy, Housing Market, Real Estate Economics, Real Estate Investing, Real Estate Market, US economy

About Marco Santarelli

Marco Santarelli is an investor, author, Inc. 5000 entrepreneur, and the founder of Norada Real Estate Investments – a nationwide provider of turnkey cash-flow investment property.  His mission is to help 1 million people create wealth and passive income and put them on the path to financial freedom with real estate.  He’s also the host of the top-rated podcast – Passive Real Estate Investing.

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