In the past two years, housing starts have stayed mostly in the range of 500,000 to 600,000 annualized rate.  Housing starts in the latest available month of February were exceptionally low with only 479,000 annualized unit production pace (even after accounting for seasonal factors).  Historical normal activity would be around 1.5 million to 1.6 million.

There are certainly plenty of vacant homes and still elevated inventory of homes for sale.  However, one has to ask if the very low level of housing starts – if continued for another year or two – could potentially cause housing shortage.  The country after all is adding about 3 million additional people each year.

Here is a simple graph of housing starts and a table showing possible cumulative housing surplus/shortage from 2003, the point at which most analysts believe the starting point of the housing bubble.

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