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A Note on Housing Unaffordability in America, &

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A Note on Housing Unaffordability in America, &

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Brad DeLong
Apr 3, 2022
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A Note on Housing Unaffordability in America, &

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FIRST: A Note on Housing Unaffordability in America:

Why is housing so unaffordable in America today? Yes, NIMBYism. But there is more:

We Are Only Now at Normal, after 15 years of sub-normality in construction:

  • Single-family housing starts fluctuated around 1,200,000 a year for a generation and a half…

  • Then the mid-2000s boom…

  • Then the crash before the Great Recession…

  • (Note: the housing crash did not cause the Great Recession—the economy had rebalanced out of housing and into other sectors before the recession began)…

  • Then the most ænemic recovery in housing imaginable…

  • Why so ænemic a recovery?…

  • My guess: the U.S. Treasury kept saying it was going to reform housing finance and the GSEs, so people waited to see…

  • And the U.S. Treasury never did so…

  • The post-2007 shortfall in housing construction relative to that “normal” is immense…

  • The post-2007 shortfall is 4/3 as deep and more than twice as wide as the extra housing construction of the mid-2000s boom…

  • That means that the anti-boom is three times as many houses not built (relative to the 1.2M/year “normal” pace) as extra houses built during the boom….

  • Is it any surprise that as soon as people feel they have enough wealth to extend themselves, housing real estate prices float upward?

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CONDITION: Wells Fargo’s Forecast, at Least, Still Looks Pretty Transitory:

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