A Decade in Housing

One way of looking at the housing bubble is to see how much economic activity it first stimulated and how much of it we then lost. In this industry the U.S. Bureau of the Census avoids words like “shipments”—homes are not exactly shipped. The Bureau talks instead of “Value of Business Done.” Herewith then a graphic that shows this value from 1997 through the year 2000.

The big kid on the block is the single-family home, a category that also includes townhouses of the kind that, while they touch, a full wall separates the two residences from roof to the lowest basement, if any; the little brother is multi-unit residential construction; it includes apartment houses, condos, and the like.

The Bureau only reports on these two sectors in Economic Census years (they end in 2 or 7). I’ve rendered values for those years in black—and then, to get a proper curve, I’ve extrapolated the other points using percentage changes to housing starts—which are reported every year, indeed every month.

Interesting picture, this one. The multi-unit sector shows how the single-family sector would have performed had the bubble never come. The pattern is visible in the upper curve from 1997 through 2001. Then the speculation suddenly set in. Single-family rose like a rocket. Of added interest here is that the construction industry itself—if not yet the whole world, knew that things were badly off. The bubble here peaks three years before it bursts, in the financial sector, in 2008. The dark fairy suddenly swooped down in 2005—and the industry had to give it all back again—and more.

Now we constantly hear the innovators, progressives, and the cool asking, when others are leery of going upstairs, never mind all the way, “Hey, what century is this, doll? Hey, this is the twenty! first!”  The idiots, alas, are always saying that. Before the dot.com bubble people thought that fundamental economic laws had been suspended inside the dizzying heights of cyberspace. Not so.

Whatever the century, we may be dead certain. Somebody will try to get something for nothing. Both those who seductively whisper and those who yield to temptation must eventually—pay up. Here’s how it looked in housing. And the sobriety will last until this bubble sinks from memory and some other crazy “innovation” takes somebody to the cleaners. Next time.