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Back to our original assertion regarding low building being bullish for future RE prices. I stand by my assertion that you are basing your wishful thinking on historical growth patterns, and nothing else, that have extremely low to practically zero probability in manifesting.
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There are two ways to increase the price of a good, in this case housing.
1) Increase demand – often through prices or some pseudo price change like gov stimulus.
2) Constrain supply – like building fewer houses. I think this is the one that you are missing.
If there is no growth in supply, while demand grows albeit very slowly(population growth), prices will climb. Right now there is a surplus. In a condition of no new construction, prices will slowly go up as the ‘best’ properties get picked up and people over-bid on the remaining – trying to avoid being locked out. The increase in property prices will be very slow until most of the supply has been consumed.
Situations that can affect the price/demand interrelation:
1) Continued low employment, causing people to ‘go-off-the-grid’ so to say, or to double up(grown children moving back in with parents) which will reduce the demand for housing, and thereby the prices
2) Inflation will actually cause house prices to rise. In an inflation scenario, tangible goods.. ie food, housing, gold.. etc will rise in relation to the dollar. Right now we are seeing deflation still – part because of drop in true money supply (it also included all leverage-able tangible goods – largest of which are houses). The ‘printing’ of money is trying to offset this, but watch out for the ‘recoil’ when this type of slack is taken up.
The large home builders, ie KB, have effectively locked out the small contractors who would build houses .. through relations with cities & counties as well as locking up the land through land purchase options. The housing market is not a true ‘free market’ anymore.
