Why household formation drives homebuilder demand (Part 1)

Low household formation numbers over the past five years will drive homebuilder demand going forward

Since the financial crisis began, demand for new construction has fallen, as household formation numbers have dropped. The low household formation numbers have been driven by a poor economy—not by demographics. This represents pent-up demand that must be satisfied in the future.

This series will discuss household formation numbers historically and over the past few years. We’ll compare those numbers with housing starts and show that there’s tremendous pent-up demand for housing, which will drive homebuilder earnings for years to come. We’ll explore the following considerations.

• The state of the first-time homebuyer (Part 2)
• Household formation numbers (Part 3)
• Housing starts (Part 4)
• Implications for homebuilders (Part 5)

The state of the first-time homebuyer

This analysis continues in Why household formation drives homebuilder demand (Part 2).