You don’t have to look very hard for glowing characterizations of the numbers on housing sales for September. Jeffrey Snider provides a more dour view in his latest lengthy offering at RealClearMarkets:
The unadjusted sales estimate, that 52,000, was up almost 20%, too, but year-over-year rather than month on month. It sounds impressive but it’s actually more typical of the last few years, suggesting there wasn’t anything all that special about September’s builder activity. There really isn’t any good way, especially in a very noisy data series like home sales, to compare one month to the next.
There is much less for statistics in comparing September 2017 new home sales to those in September 2016, as I did above, or to those in September 1995. In fact, there were fewer new homes sold last month than in the same month twenty-two years ago; 52,000 vs. 54,000.
That’s the part to really focus on, and the one no one ever does in tying 20% growth to something it truly isn’t. The numbers that relate to the comparison, or should if there weren’t something else going on, are staggering. Between September 1995 and September 2017, the Civilian Non-institutional Population, the BLS’s estimate of potential laborers in the US, expanded by 56.6 million people.
How is it possible, then, that fewer new homes were sold in a “very good†month just recently than almost a generation ago?
By population alone there should have been something like 70,000 new homes sold in September (+56.6mm population represents a 28% gain, so 54,000 new homes sold in 1995 should lead to 69,300 new homes sold in 2017 for a constant demographic). The easy answer is the housing bust, meaning that twelve years ago and before there was a rush of new homes built that really should not have been; for some time, the US housing stock was overdone.
That explanation, however, doesn’t follow in the demographics, either. It has been, again, twelve years since that peak, and for almost all of those twelve years since then housing construction has remained at a rate well-below historical trends. By all counts, after so much time, the oversupply of those housing units has been absorbed and then some.
Basically, although the population has grown people don’t have enough money to buy houses, either because they don’t have jobs or because the jobs they do have don’t pay enough to buy houses.
To his analysis I would add one thing, something I haven’t mentioned in a while. When the factors of production are themselves portable Ricardo’s analysis of international trade is no longer operative. Comparative advantage no longer matters because what conveys that advantage may then move from country to country. All that matters is absolute advantage.
This article embodies most of my rants. There is so much packed into it that I am at a loss to comment, but I feel vindicated by his use of “credit-based currency”.
He explains the problem with modern free-trade. I suspect that Riccardo assumed trade would be goods for goods or value for value. Today’s version of free-trade is goods for IOU’s or value for anti-value (debt). The problem is the monetary/financial system.
Sen. Glass & Rep. Steagall figured out the danger of allowing commercial and investment banks to interact freely, and they produced a solution. When money is created through lending, all financial products are not equal.