100,000 jobs lost in the U.S last week alone. Yikes.

Considering the economic carnage of the past few months, it might seem a little odd that we’re generally in a sunny mood about our business and the upcoming opportunities in this market.

First of all, and folks who have been with us for a while have heard us repeat this a thousand times, the cornerstone of why real estate is consistently a good investment is this: Recession or no recession, people always need a place to live. The fact is that on a macro level, real estate is about as inelastic of a commodity as you get (it’s when you start talking about a townhouse on the Upper East Side versus a sixth floor walk-up in Paterson that the game becomes different).

Now everyone knows what the housing market has been like since the summer of 2007. Well, it has continued to get worse. The November numbers were released for The Case-Shiller Home Index last week, and in its monitoring of the 20 most populated US metro areas, the median price of a home fell 18.2 percent from the same period in 2007. This is the worst annual drop on record. Given recent events, it’s not too difficult to imagine that December and January numbers will not be brighter.

People who have to move out of their houses are going into apartments, and folks who’d normally be buying their first homes right now are staying in their apartments. There are no leaps of faith or magic at work here, it’s just simple numbers. People always have to find a place to live, and in a market like this one it sure as hell won’t be in a house.

Now I can already hear some people saying “Well wait a minute, with prices as low as they are, aren’t all those houses going to get snapped up as soon as the economy starts moving again and people take advantage of such a ridiculously depressed market?” And that’s a valid worry, but it’s also not going to happen, and here’s why:

1) New home construction dropped 45 percent last December in comparison to December of 2007. For 2008 overall, it dropped 33 percent, according to the US HUD Office. Also, according to the Economic and Housing Market Outlook, housing starts are going to be 62,000 in 1Q ‘09 as opposed to over a million for 1Q ‘08. Here’s the link. See for yourself. NOBODY is building right now. No. Body. Multifamily starts haven’t plummeted as drastically, but with a 17.1% drop last December, they are also not close to anything remotely healthy.
2) The US has one of the highest population growth rates of the industrialized world. The US Census puts the 2008 growth rate at 1.01%. That is higher than Canada, higher than Japan, and higher than any country in Western Europe (besides Ireland), where some growth rates have actually gone negative. American immigration has been high, and fertility has been strong.

The US is currently on track to experience a MAJOR housing shortage in a few years. When the economy gets going again, people who want to buy a house won’t be able to find an empty one. And people who want to rent an apartment will find long, long waiting lists. Considering that it’s going to be a while before builders even get financing to start working again, added to the fact that increasing the housing supply has inherently large time-costs, the housing supply is going to be at a stand-still for quite a number of years.

Meanwhile, the population keeps rising.

A lot of people are taking a “wait and see” attitude in this market right now. But when the market changes, they’ll be scrambling. And Taurean Global Properties and its investors will own apartment buildings.

---

Possibly related posts: (automatically generated)

• Housing not back yet
• Our response to the last few months, and what’s to come
• Canada’s housing not coming back
• Peeing on the “Housing rebound parade” with February meltdown