In February's article, I noted how strong demand combined with
relatively slow growth in housing supply in RI have brought about
high and rising home prices. But where has all the demand strength
come from? The answer may surprise you.
Population growth is an important driver of the
demand underlying housing and retail strength. But if RI population
has declined over the last decade, as most of us have been led to
believe, how can demand be strong. The truth is the decade of
population stagnation and decline predicted in the 1990 census turned
out not to be true. Ten years later the 2000 census showed actual
real population growth throughout the decade. (see chart).
So, the housing and retail sales momentum that
existed as we entered this decade is not really all that mysterious.
Rhode Island’s growing population has, along with other forces,
sustained and enhanced momentum in housing and retail sales. This is
good news, since it indicates that factors such as interest rates and
income growth are not the only factors that have propelled these key
sectors of our economy.