Loading the Springs: Weber County's Pent-Up Demand

In understanding the housing market, it is important to understand market dynamics in light of the variables that are at play.  Fundamentally, the housing market is driven by the activities of people.  Jobs, family creation, plague, war, natural disaster, and other factors all affect how people demand housing in a particular location.  Thus, it is important to know what people are doing and why.

While thinking on this on a long drive this week, I began to wonder how our sales volume in Weber County stacked up against the population count.  How bad is the housing market?  We know it is less than what it was at the peak of the bubble.  But on a per person basis, what does that look like?

I started digging through the data and put together a chart showing "sales per person" for Weber County.  The idea would be that the sales would be adjusted to reflect the change (or in this case growth) in population.

Since people need a place to live, it is reasonable to assume that an increase in people could correspond to an increase in sales volume.  If all other things held constant, you would expect to see a per capita numbert that is consistent from year to year even as population increases.

So what does Weber County's chart look like?  Queue the chart please:

Data was pulled from the U.S. Census and from the MLS for sales to drive this graph.  As you can see, the normal estimate population growth line (in red) is very seldom followed.  Unfortunately, I didn't have enough data go back further in time.  However, the bubble is clearly apparent in the chart.  Since the bubble has burst, it appears that sales are now about 25% below where they should be based on how our population has grown.

What does this mean?  It means that for the time being, there is pent up demand in the market place. It is represented by people renting or living in their parent's basements instead of purchasing homes of their own.

At some point in the future, this gap will be made up and sales will be boosted just to return back to historical norms.  Since the market is troughing right now, look for that correction upwards to come over the next several years.  This is just one more reason that now is a great opportunity to buy a home or invest in real estate.