When I saw this story a little while ago “Five Years After Crisis, No Normal Recovery“, it reminded me of a blog entry I penned a while back entitled “Housing Starts Are Negative“. My main point was that there is not much reason for a lot more houses to be built in the U.S. right now. By many estimates, there are more than 10 million vacant homes in the U.S. I understand that some people want to build their own home, but with so many nearly new houses on the market, there should be plenty of options. There are whole subdivisions (in pretty much every state) which are sitting nearly empty!
So why are more people not buying the vast inventory of new homes? It is part demographics and part economics. On the latter point, the prices of houses have still not come down to the level needed to clear out the old inventory. Prices need to drop more (more sarcastic economic analysis found here). When (former) million dollar McMansions start selling for a quarter million or less, then the market will clear a bit. Even then, in a world of higher energy prices, there are less people that can afford the energy bills that come with living in 3,000, 4,000, and 5,000 square foot homes.
Which, leads into the demographics. Young people are not starting families at the same rate as in the past. The job market is bleak and real incomes are in decline which means young people are just not buying as many homes. Retiring baby boomers already own most of their homes outright, so they will not be buying either.
I don’t view these trends as completely negative. Even though I own a house, and the value has dropped by about 40%, I would rather see house prices fall a bit more if it meant less new (empty) homes being built. From an environmental and pollution perspective, it would just be better if less houses were built. I know this goes against the traditional thought that “growth” and “building things” are signs of progress. They are not as good of metrics as in the past. We have reached the point in the world where it is getting tougher support economic “growth” and an expanding population (without more great leaps technological progress). Pollution is intimately tied to traditional metrics of economic growth. AGW theorists note carbon emissions are tied closely to economic activity.
Please don’t label me a Luddite. I would certainly love to see more progress in the future. I just don’t think building more roads, more strip malls, more sub-divisions, and more parking lots is the answer to our economic woes. All the policies currently in place to prop up the housing markets are ill-conceived and will only make the problem worse in the future. Instead of prodding people who cannot afford a house (or do not want a house) into buying a house, how about we get people thinking about a different future. Instead of buying things and building things for the sole purpose of propping up the economy, how about we strive for better health, longer lives, more comfort, higher efficiency, and more happiness.
Don’t label me a totalitarian either. Although I wouldn’t mind seeing the population come down, less new homes being built, and greater energy efficiency, I can’t imagine forcing people to adopt new ways of living. I am more in the persuasion business. In the end, if people continue building with abandon and paving over more of the planet, mother nature might end up forcing some changes.
This post was written by jloew on July 25, 2012