One question I got when doing a housing talk in Portland last week was the old standby of isn't it perverse to talk about the need for new housing supply when America has so many vacant homes. The short answer is: no.
The medium answer is that America is really big, so different things can be happening simultaneously.
The longest answer is offered by Jed Kolko, who shows us that there are huge metro-area-to-metro-area variances in the level of housing vacancies. If everyone was engaged in craft production at home and then sold stuff over Etsy, there might be no problem here. In Detroit, 12.1 percent of all units were vacant as of July. The West Palm Beach, Tuscson, Fort Lauderdale, Gary, Dayton, Toledo, Cleveland, Palm Bay (Florida), and Las Vegas metro areas all have vacancy rates of more than 5 percent. So everyone could just move to Florida (or Ohio) and enjoy some warm weather (or Ohio stuff) and we'd all be fine.
Except it would be hideously inefficient for us to all try to become craft producers living in Detroit and selling stuff on Etsy. Most of us can become more prosperous by working a proper job. And most jobs in America are providing local services to other people. If Tucson has a high vacancy rate because its economy is depressed, then moving into a vacant home in Tucson doesn't help you. Vacancy rates are below 2 percent in New York's suburbs, Boston's suburbs, Silicon Valley, D.C., and its suburbs, Austin, Orange County, etc. This means that if more housing were available in those key markets more people could move to job opportunities. It also means that there's potentially a lot of construction jobs to be done in those places. Some of this is local housing regulation, and some of it is monetary policy. With rents generally on the rise (PDF) throughout the country, people thinking of creating new housing stock have to wonder—should I assume this demand will still be there by the time a project gets finished, or is the Fed going to look at the inflation in the housing component of CPI and strangle demand? A clear statement à la Charlie Evans like "we'll relax about inflation until we get much closer to our employment target" would do a great deal to clarify that it makes sense to hire people to build new housing in hot markets.