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David Stockmans Contra Corner
Washington’s Housing Inflation Racket

Washington’s Housing Inflation Racket

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david stockman
Sep 26, 2024
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David Stockmans Contra Corner
Washington’s Housing Inflation Racket
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Today’s news about August new home sales tells you exactly why the mainstream financial press is about as useless as teats on a boar. Its recency bias and context free stenography with respect to the flow of incoming data is actually a wonder to behold.

We were told today that August new home sales were down by 4.7% from an upwardly revised July figure, but not to sweat it. On a Y/Y basis new home sales were up a solid 9.8%.

Actually, there was nothing solid about it. The most important aspect of the August sales number is that it continued the long-standing fact that home sales in America have trended further and further behind the number of US households needing shelter. As shown below, the 710,000 annual rate of new home sales (black line) in August stood exactly where it had posted 53 years ago in November 1971!

During the same half-century span, of course, the number of US households (purple line) reported by the Census Bureau more than doubled, rising from 65.8 million back when Tricky Dick Nixon was still in the White House to 131.5 million at present.

The arithmetic, therefore, is pretty obvious: Back in 1971 the US economy was annually generating one new home sale for every 97 households, but today that figure stands at one for every 184 households.

Annual Rate Of US New Home Sales Versus Number of US Households, 1971 to 2024

The same pattern emerges when you look at the number of housing units completed versus the number of US households. In the former case, 1.80 million units (annualized basis) were completed in September 1971, which is nearly identical to the 1.79 million figure posted today for August 2024.

Of course, relative to the number of households presumably requiring shelter, not so much. The number of annual housing unit completions back in 1971 was equal to one for every 37 households. Today that ratio stands at one completion for every 74 households.

Annual Rate Of New Housing Completions Versus Number of US Households, 1971 to 2024

Needless to say, the above patterns are a head-scratcher deluxe, given that the level of fiscal and monetary stimulus aimed at the housing sector has increased by orders of magnitude since the 1970s. For instance, the inflation-adjusted mortgage rate has declined almost continuously for the last 40 years. Even with the recent uptick owing to the Fed’s belated attack on inflation, the real 30-year mortgage rate stands at just 2.6% or only a fraction of levels generally prevalent in the 1980s and 1990s.

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