2010 February 21 Sunday
Household Formation Down Two Thirds
Harvard econ prof Edward L. Glaeser says it is hard to work off the surplus in housing when household formation is half the rate of new home construction.
The only way to get through the excess is if households form at a faster rate than houses are built. We completed 800,000 units last year, and if the rate of household formation had continued at its past rate of 1.34 million new households a year, then we would have absorbed 700,000 excess homes (assuming a depreciation rate of 200,000 units a year). But the rate of household formation was not anywhere near 1.34 million.
According to the Current Population Survey, only 400,000 new households formed from March 2008 and March 2009. While there were about a million new families, the number of nonfamily households dropped by almost 600,000. The number of 18- to 24-year-olds living at home increased by 300,000.
A large and growing portion of America's labor force lacks the skills needed to work as knowledge workers. Meanwhile, the number of people needed to do manual and less skilled work isn't going to grow much. Expect more downward pressure on wages of the least skilled and chronic unemployment for millions.
New households could form rather rapidly, if housing prices are allowed to decline. Many people (citizens and immigrants) are currently living with their extended families and would probably get a house/apartment of their own if housing prices were lower.
Depending on the outlook for commercial real estate, we could also rezone some currently residential areas as mixed use and convert some housing to business use.
Of course politicians aren't thinking about people looking to start families. They're thinking about their buddies in the homebuilding industry - perhaps the most politically well-connected industry in America.
buddies in the homebuilding industry - perhaps the most politically well-connected industry in America
Really? If that's so, why did President O redirect so much of the stimulus funds away from construction and traditionally male employees who were hardest hit by the meltdown toward education, nursing and other traditionally female employees who were largely unaffected by it?
Homebuilding is not an American industry, it is a Mexican illegal industry. I haven't seen an American drywaller, carpenter, roofer, or carpet layer in my town for at least ten years. Ask the white college kids how many do construction during the summer. Compare that with the number who worked twenty-thirty years ago. Or make it easier: goto vdare.com and look at the American worker displacement index.
Higher taxes on small business prevents hiring of new workers. Tack on the generally antagonistic attitude toward private business and entrepreneurs that radiates out of Washington DC these days, and ask yourself where th new jobs will come from? This US government is the most anti-business of any in history. All that is lacking is wage and price controls. That would finally kill the goose. That, or a complete government takeover. What do you think government takeovers of health care and private retirement plans will do to a person's ability to achieve on his own?
The American media needs to focus on how racist the Tea Party movement is, and how stupid Sarah Palin is. The real threat to the US is from right wing extremists like Glenn Beck. I read The Nation and The Progressive. It's the only place you can find uncensored truth.
Fabulous Max, I can't tell if you're being sarcastic, but the Teabaggers' movement is not racist. It's not even a right-wing movement--their goal is to slash taxes and regulations which currently place workers and small businesses at a disadvantage. You'd know this if you attended some of their meetings.