Wednesday, December 21, 2011

Even More Perspective on Housing

In response to my post Some Perspective on Housing, reader Tom Lindmark commented:

It would be interesting if you could take the time series back far enough to account for the rise of the Boomer generation. My guess is that if it were at all possible to normalize the data for their outsize impact we might see a far lower number of new home starts than what economists predict would occur in a "healthy market".
The chart below normalizes housing starts by the 16+ year old population (not perfect as it does not account for family size... the smaller the family size, the more housing units needed). What we see is that the most recent spike in housing units during this bubble was not as outsized as I would have thought (at least relative to the baby boom when household formations spiked), while the drop off remains severe. For reference, 0.5% roughly equates to 1.2 million homes (i.e. the number of homes economists referenced in a healthy market).

Source: Census / BLS