A point I want to keep emphasizing is that while the rapid increase in housing construction during the 2000s was not unprecedented, the collapse in home construction is.

FRED Graph

This is just raw number of new units coming online. Its not adjusted for anything. So there are a lot of factors: population growth, age distribution, second-home ownership, apartments vs. single family, etc.

However, just in terms of units the peak of the boom was not way off. If there was way too much construction it has to be because the fundamentals were way different. This might well be, but understand that now the “this time is different” argument is being pushed by those who say there was a dramatic overinvestment in terms of the number of units.

Now, that’s not to say the units themselves weren’t too nice or that people were doing too much remodeling. Here is Private Fixed Residential Investment as a percent of GDP.

FRED Graph

Though the 2000s weren’t as big as the post war boom they did out pace everything since the 1960s. Still the crash is far more unprecedented than the peak.

Another way of looking at this from a historical flow perspective is looking at how many new housing units were started each month versus how many new Americans there were each month. Again, the mildness of the run-up compared to the crash is apparent.

FRED Graph

Indeed, because its more natural to think of people per home rather than homes per person. The implications from this view of the data I think are more instructive.

FRED Graph

Some people die each year and some homes are torn down or condemned each year.  Unless those ratios are changing rapidly then a current levels the number of persons per home will converge towards more than double its long run average.

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