Housing bubble once again

Don Marron summarizes a study of household formation. Consumers crowded in with relatives and room mates:

On Wednesday, the Mortgage Bankers Association released a study by Gary Painter (sponsored by the Research Institute for Housing America) that examines this question. His answer? America lost 1.2 million households from 2005 to 2008, despite ongoing population increases. Oh, and we likely lost even more households in 2009.

Needless to say, that retrenchment contributes to the ongoing overhang of vacant homes and rental properties.

This presents a problem for housing bubble theorists. Both the consumer and the house builders responded well in 2005 to declining demand. Housing starts halted as consumers shied away from buying. The one million or so unsold homes, both used and new, represent this decline in households. So, the price signal worked, as it should. Builders responded normally.

My guess is national housing policy, once again, forcing cross regional inflation from high growth areas to low growth areas. So, if you didn't live in Silicon Valley, you saw house prices rise more than inflation which was a little over 3% during the period.