There Is No Excess Housing in America

A blog about business and economics.
May 30 2012 2:32 PM

There Is No Excess Housing in America

I'm completely in sympathy with Ed Glaeser's argument that a return to peak-level house prices is neither desirable nor a necessary element in macroeconomic recovery, but his take on construction is very strange:

The one sector that will not boom until housing markets come back is construction. From 2003 to 2008, the U.S. added 9.3 million units to its housing stock, and the number of vacant homes increased by 3.4 million. Construction can only come back when we work through that excess housing inventory, and that process has been slow. The rate of household formation was incredibly modest during the downturn, as young people increasingly chose to live at home. Eventually, though, construction will return to the level needed to satisfy the still growing U.S. population.
Advertisement

3.4 million vacant homes sounds like a lot of vacant homes. But the American population grows by about 200,000 people per month and we normally get about 0.7 houses per new person. Working through an excess inventory of 3.4 vacant homes should take about two years. And yet here we are in 2012. Now it's possible that what's happened here is that "young people increasingly chose to live at home" but a more plausible account would be that high unemployment has forced a lot of people to double up.

The paradox here is that weak employment in construction and consumer durables (appliances, furniture) is both a cause and a consequence of weak overall employment and income growth. The economy doesn't need homes to get more expensive, but it does need the Federal Reserve to clearly signal that it intends to keep interest rates nice and low for a long time to get people back to work building the new housing supply that we need to avoid scarcity and price spikes.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

TODAY IN SLATE

Politics

Meet the New Bosses

How the Republicans would run the Senate.

The Government Is Giving Millions of Dollars in Electric-Car Subsidies to the Wrong Drivers

Scotland Is Just the Beginning. Expect More Political Earthquakes in Europe.

Cheez-Its. Ritz. Triscuits.

Why all cracker names sound alike.

Friends Was the Last Purely Pleasurable Sitcom

The Eye

This Whimsical Driverless Car Imagines Transportation in 2059

Medical Examiner

Did America Get Fat by Drinking Diet Soda?  

A high-profile study points the finger at artificial sweeteners.

The Afghan Town With a Legitimately Good Tourism Pitch

A Futurama Writer on How the Vietnam War Shaped the Series

  News & Politics
Photography
Sept. 21 2014 11:34 PM People’s Climate March in Photos Hundreds of thousands of marchers took to the streets of NYC in the largest climate rally in history.
  Business
Business Insider
Sept. 20 2014 6:30 AM The Man Making Bill Gates Richer
  Life
The Eye
Sept. 22 2014 9:12 AM What Is This Singaporean Road Sign Trying to Tell Us?
  Double X
The XX Factor
Sept. 19 2014 4:58 PM Steubenville Gets the Lifetime Treatment (And a Cheerleader Erupts Into Flames)
  Slate Plus
Science
Sept. 22 2014 8:08 AM Slate Voice: “Why Is So Much Honey Clover Honey?” Mike Vuolo shares the story of your honey.
  Arts
Television
Sept. 21 2014 9:00 PM Attractive People Being Funny While Doing Amusing and Sometimes Romantic Things Don’t dismiss it. Friends was a truly great show.
  Technology
Future Tense
Sept. 22 2014 7:47 AM Predicting the Future for the U.S. Government The strange but satisfying work of creating the National Intelligence Council’s Global Trends report.
  Health & Science
Bad Astronomy
Sept. 22 2014 5:30 AM MAVEN Arrives at Mars
  Sports
Sports Nut
Sept. 18 2014 11:42 AM Grandmaster Clash One of the most amazing feats in chess history just happened, and no one noticed.