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How Many Homes Do We Need Anyway?

Forecasting long-run housing demand.

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Hardly a week passes these days without some reference to housing inventories or starts making its way into the headlines. Almost invariably, the headline and accompanying story are dominated by the doom and gloom of the current period's data: Starts are severely depressed, inventories remain bloated, and it will take many more months to work off the excess supply we accumulated in the heady days of the housing boom.

Given the role housing played in our current predicament (and may play in getting us out of it), the attention paid to week-to-week developments is certainly merited. Unfortunately, our collective obsession with the latest data release tends to divert attention from what we'd argue is an equally important issue in the long run: Going forward, how many homes will we need?

Daniel Rohr does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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