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Is new construction going extinct?

Author's Note

I started researching this article thinking that the answer might well be "yes, new construction is becoming extinct." Everywhere I go, I see houses for sale, and I know people who are underwater in their mortgages and just waiting until they can put their houses on the market. Obviously, there will be new construction eventually, but the prospects didn't seem good for a long, long time.

One of the first things I learned was how tied construction -- especially home construction -- is to social patterns. The recession prevented conventional household formations and sent some families to live with relatives. That trend inhibited the demand for houses, whether they were previously owned or new.

Another insight was a reminder that the economy goes in cycles. Recessions -- even depressions -- end eventually. What I realized was that this cycle has been unusual because the housing bubble was a direct cause of the recession. For that reason, housing has been slower than usual to recover, and has been a follower rather than a leader in the broader recovery. But as things begin to look up, all that pent-up demand for housing has an effect, and new construction will follow.

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