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Strategies & Market Trends : Booms, Busts, and Recoveries
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To: elmatador who wrote (17866)4/5/2002 1:26:25 PM
From: AC Flyer  Read Replies (1) of 74559
 
Good article. Illustrates why the doomsters' worst case economic scenario will not come to pass in this decade, imho:

1) Demographics:
BUYERS ABOUND. A big reason for the optimism is demographics. The 2000 Census suggests that household formation ran about an average of 1.25 million annually during the 1990s. Household growth likely will average 1.23 million a year over the coming decade, estimates Economy.com.
This is true but misses a couple of key factors - the Boomers' trade-up and vacation home buying.

2) Productivity
The U.S. may even be able to do better than that, considering the giant strides companies are making in hiking their efficiency. If workers continue to pocket much of the gain from the added output created by the New Economy, then much of that money could find its way into the housing market (see BW Cover Story, 4/1/02, "Retating the '90s").

3) Real Income Gains
MORE TO SPEND. A number of factors affect home prices, but over time price appreciation largely tracks the growth in household personal income. Workers' wages and compensation should continue rising smartly. Personal income per household should climb over the coming decade at a real 2% average annual rate (4% nominal), assuming the economy's noninflationary growth potential is around 3%.
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