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  • Housing Not An Indicator of Overall Economic Health

Economy

26 Apr 2010

Housing Not An Indicator of Overall Economic Health

  • By Bill Conerly
  • In Economy
  • 2 comments

Today's Wall Street Journal suggests that the housing industry will provide a measure of the strength of the post-stimulus economy.  I think that view totally ignores the fundamental issue of the housing market: oversupply.  The government today released data on housing inventory, and the news is still grim.

Housing Vacancy

We have too many housing units.  Population growth would normally solve this problem, but the recession has triggered a lower ratio of households to people.  In other words, we're living together more often.  Couples are delaying divorce, or else staying in the same house after divorce (which must put a real chill on dating after divorce).  Adult children are coming back home.  In addition to these factors, a number of immigrant workers have returned to their home countries, preferring to be unemployed at home rather than unemployed in the United States.

With the housing oversupply, there isn't much reason to build.  Oh, there are certain neighborhoods where certain types of housing at certain price points are still in demand.  New construction is not falling to absolute zero.  But there is no hope for a healthy housing market until the oversupply goes away.

What will lead to the end of housing oversupply?  First, job growth will get those kids out of their parents' homes.  Second, general population growth will help, including some foreign workers returning to this country.  But don't look at your 2010 calendar to find the date that the oversupply will be worked off–you need a calendar that runs into 2011 at least.

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Bill Conerly

    Comments

  1. geo
    April 26, 2010

    population : ~ 300.000.000 units
    yearly new house market :~400.000 units
    leastwise,we would say that the USA
    is the World’s biggest Third World Country.!?

  2. gdr
    April 26, 2010

    the ownership of the house can not be
    interpreted as a -saving instrument- !
    becouse of it’s “negative amortization”
    values…!
    Existing House Markets merely could be
    interpreted as -speculation markets- !
    which is frequently determined by
    mobile population actions ..
    not as seriously housing indicator..!!

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