Two posts in one day! Oh Frabjas day, calloo callay!
This is something I find very frustrating. I moved around a lot as a kid. I lived in 5 homes before I moved out. My parents never once considered buying a "new" house. A key economic marker, at least to the guys at Planetmoney, is the number of New Housing Sales, or New Housing Starts. That is, the number of new houses being sold, or the number of new housing being built. Neither makes much sense to me.
1) The population continues to grow. So we'll always need new houses. But families die off, move around, houses burn, etc. My wife's hypotheses is that this number will never be the same, and that excess inventory should be burnt to the ground. I don't think that extremely, but what I do think is that, this number can't be all that exciting to watch. The population doesn't change that much. And yet, look at it. It's a friggin' roller coaster:
So something must be screwy. And, it is. The housing market was a bubble. People were buying homes and flipping them. Homes were no longer a long term investment, and so speculators bought several of them, thinking to sell after making minor alterations. People in my own family owned multiple homes, not because they could afford to, but because they thought they could sell before the bubble burst.
So maybe we should stop looking at this number. The number should be relative stable, and should only match the need for housing beyond what is already on the market, which is considerable. Manhattan is really the only place in the country that needs new housing, and frankly, we're a bit over-saturated as well. Dozens of new luxury apartments opened up in the lowskirts of Harlem and Morningside Heights. And most of those units are still empty! Brooklyn had it much worse, and still has huge deserted tracks of useless luxury buildings.
2) Not thinking about the economy at all, but frankly, there is only one reason to build new house. Ecobuilding. My wife's parents are examplar's of this, with the help of a graduate student in architecture, they actually constructed a house built specifically to have a low carbon output, no air conditioner, no gas heating. It's still a work in progress, but it will be pretty amazing.
Other than that? No. Not once in those 5 moves did my parents even consider building a home. For one, in an old Connecticut community of bluebloods, development was anathema. To be sure, they were there, we lived in one for several years. But I can think of only three developments in the entirety of my town. When people bought houses, they bought houses in established neighborhoods.
Everything falls apart. I can see renovations on existing homes. I can even see demolishing old homes because of filth, contamination, hoarding, damage, unsafe conditions. But how often is that the case? How often is it that a home is simply beyond the pale? I can't think i t's that often. Apartment buildings in New York are rarely demolished. In fact, it's almost impossible to extract some tenants. There's a building on my corner that has been all but derelict save for one or two filled apartments. Derelict for at least five years! That's expensive real estate. Worth millions and millions of dollars. And someone is using it to the last drop.
Bottomline. I don't think new housing starts or sales should be an economic performance measure. I think the only reasonable explanation for the chart above, is the proliferation of housing bubbles.