May 01, 2009

Addendum to W07-7: Using Long-Term Demand Projections to Estimate Short-Term Market Imbalances

Daniel McCue

NOTE: Since the publication of this report, JCHS Household Growth Projections have been updated with new projections that supersede those found in the paper below.  For the most recent JCHS Household Growth Projections  produced in 2010, Please refer to Working Paper W10-09.

As described in detail in Projecting the Underlying Demand for New Housing Units: Inferences from the Past, Assumptions about the Future (JCHS Working Paper W07-7), a major shortcoming of an accounting-style demand projection methodology is that it must be viewed across a timeframe long enough for long-run trends to hold and for cyclical aberrations to even out over the course of the projection. Also necessary is the assumption that markets are in balance at both the beginning and end of the projection period. In reality, however, it is rarely the case that markets are ever in balance for any extended period of time. Although guessing how far out of balance markets will be at the end of a 10 year projection period is not worthwhile, this addendum will show how it may be possible to estimate the over- or undersupply entering the projection period by applying our methodology to past time periods…

Category: Research Notes

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