Friday, April 16, 2010

What Housing Overbuild?

My earlier post regarding housing permits got me thinking... how do the permit figures compare historically on a per capita basis? I understand this isn't perfect as this is a flow (new houses added) vs. stock (total existing houses), but it was pretty surprising to me.

Surprising in that the bubble build quite frankly doesn't look that huge and surprising that we are now at extreme lows.

And vs. the 50 year average of 0.000495 permits per capita (in the chart below, the zero line is equal to the 0.000495 level).

Is it possible we'll go from an overbuild to a shortage within a 5-10 year period?

Source: Census


  1. SPECTRE of DeflationApril 16, 2010 at 7:32 AM

    What? You are kidding right? The demographics alone are enough to throw cold water all over this thesis let alone all the other problems we face. We may get your thesis, but it will be because housing as an investment will be destroyed between here and the future 5 to 10 years, and housing prices will align with incomes and the old rules of home ownership. 25%/33% for average credit rating, and 28%/36% for outstanding credit. There is no way around this fact. The %s are so far out of whack that we will be deleveraging for a very long time.

  2. As you've suggested in earlier posts, regional differences may be significant.

    Also, urban/rural distinctions may be significant. Personally, I find the logic of pieces like this ( to be compelling.

  3. Spectre of Deflation- I love the name!

    You say "25%/33% for average credit rating, and 28%/36% for outstanding credit"

    That has to do with price levels of homes, whereas I am specifically talking to supply vs. demand. I don't mention price levels once (though if there is a shortage, it would obviously have an impact on the margin).

  4. Since you acknowledged the flow to stock shortcoming... It would be interesting to see annual housing permits per change in population. It's still imperfect regarding the specific demographics (and implied implications for housing demand), but perhaps still useful.

  5. SPECTRE of DeflationApril 16, 2010 at 10:09 AM

    I mention incomes because they are a central part of ever recovering from this debacle. Build whatever you like, but until the figures line back up, we are screwed.

    There are $1.4 Quadrillion Dollars in derivatives (Both OTC and private) that are being called "in notional value" which is complete nonsense. They are trading paper with one another until it all blows up. We have only begun to deleverage. This is the second inning in a game that will take extra innings.

    Look no further than GS and Paulson and Co. for what is about to happen to many firms. We will experience deflation while this deleveraging continues, followed by the worst inflation we will see in our lifetimes, and I ain't a spring chicken.

    In short, we are screwed. Debt saturation is a real be-atch, and we are there. Even Ray Charles could see this coming if he were alive today, and Ray was blind.

    By the way, my screen name comes from the 007 movies because I believe that all of this was nothing more or less than a planned demolition from crooks and thieves. They are out to steal the last nickel from the American Treasury right under our noses while we worry about housing coming back.

  6. Is this housing permits only for single family homes? What about condos or high-rises? Maybe 1 permit counts for a 100-plex high rise?

    Also if possible, a chart on housing STOCK and flow (including condos, single family, apartments etc) would be nice.

  7. this is total... i'll see what i can find regarding stock vs. flow over the weekend as i agree it will tell a broader story.

  8. An interesting plot would be the number of housing permits divided by the number of new households in a given period (supply vs demand).