Household De-formation
One of the themes we have alluded to repeatedly at Financial Jenga is trends and sustainability. When a trend is not sustainable, reliance upon it can cause massive errors in analysis. The old adage "there's nothing more dangerous than an analyst with a ruler" illustrates the danger of extrapolating such trends. In our very first blog entry we mentioned one unsustainable trend: We are at the front end of the suffering now. It was easy to see it coming when new houses were adding 2% or more to the existing supply for years and the population was growing at half that rate or less . The Census Bureau confirms that the number of empty houses has never been higher. The only way that such a wide disparity between housing demand and population could be supported was for the average household size to shrink constantly. This is obviously unsustainable since you eventually reach an average household size below 1.0. Calling that eventuality 'unlikely' is a tremendous under...