Did the housing industry over build in response to the housing boom? We can answer that by looking at vacancies, hoses held off the market, vs inventory, houses on the market.
Did the housing industry over react to prices during the housing boom? I seems so when looking at housing starts (from
Calculated Risk). They were 28% above the typical peak for the business cycle. But the collapse of housing starts did not signal the recession, that came two years later.
Jed Kolko makes an
interesting observagtion:
Nationally, Vacancy Rate Still Above Pre-Bubble Level
In the third quarter of 2013, 10.2% of housing units were
vacant, excluding vacant homes that the Census classifies as "seasonal,"
such as beach homes. Vacant homes include those for sale or for rent,
as well as homes "held off market" for various reasons. This vacancy
rate of 10.2% - the share of homes that are empty - was unchanged from
2012 Q3 and well above the pre-bubble level. In fact, the vacancy rate
today (10.2%) is closer to its peak during the recession (11.0% in Q3
2010) than before the bubble (8.8% in Q3 2000).
Jeff then goes on to dis-aggregate the housing vacancies by metropolitan district, showing that high growth metro areas have the lowest vacancy rate.
Jeff shows us vacancy vs inventory. Vacancies are held off the market, inventory is for sale, on the market. Notice the inventory rate was well managed, peaking with high prices, then declining with low prices. That represents the housing industry responding properly to price. The huge number of vacancies had nothing to do with housing, but had a lot to do with generally lower economic growth in various metro regions, and it seem the housing industry has done a good job of separating out the two effects.
This recession is a bit different from the previous recessions in which housing tends to lead growth. Something else caused the recession, not a housing collapse.
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