I teach economics and one of the recurring questions I get from students is,
"When will home construction come back?" My basic answer is, "When we consume
the excess inventory of housing," but people want a date not an event. So
here's my best estimate.
Last December, I Ran
the Numbers on Housing. It was quick and dirty, and some
might call it a SWAG, but there are some real numbers out there that you can
use. For example, the Census Bureau just released the May numbers
completions - we're running at an annual rate of 811K units. (Table 5)
In my previous post I thought that a fairly normal number should be about
1.6 M per year and that we had an overhang of about that many homes from the
peak at the end of 2006. 2007 showed completions of 1.5 M and the 2008 number
1.1 M. So for a gross estimate, I'd say we burned through about 600 K of
the 1.6 M overhang leaving us with 1 M excess homes. If we run the rest of
year at the current 800K rate, we should burn through most of the rest of the
inventory by next spring.
At this point, I'll go out on a limb and make a prediction. Housing completions
should recover early next year. It will happen later in the states
biggest problems - California, Nevada, Arizona, Florida and Michigan. It will
happen a bit sooner in the rest of the country. Since that is based on completions
and it takes a while to plan, permit and actually build a house, activity should
see an up tick late this summer or in the fall.
Labels: macroeconomics, microeconomics