Newspaper article International Herald Tribune

Oversupply of Homes Dwindles

Newspaper article International Herald Tribune

Oversupply of Homes Dwindles

Article excerpt

The reduction of supply does not in itself guarantee a revival for the depressed home building industry, but it does remove one obstacle.

The boom in housing in the middle of the past decade created a huge oversupply of homes in the United States. But now that oversupply appears to be close to vanishing, at least in most parts of the country.

That reduction of supply does not in itself guarantee a revival for the depressed home-building industry, but it does remove one obstacle.

Historically, there was a loose relationship between the population and the number of new homes sold each year, with an average of 376 homes sold for every 100,000 people over 16 years of age from 1963 though 1996. The rate fluctuated with the economy, of course, falling during recessions and when interest rates were high, and rising when the economy recovered or interest rates were declining. But the booms were mild compared with the one that came in the middle of the past decade. Then, when the credit crisis and recession arrived, home building collapsed.

Combining the boom and the bust, new-home sales have actually adhered to the historical average. From 1997 through March of this year, the average rate was 375 homes sold per 100,000 people. But, during the boom from 1997 until 2007, 1.8 million more new homes were sold than would have been expected under the historic average. Since 2007, two million fewer homes have been sold than would have been expected.

That calculation would seem to indicate that there is no longer a large overhang of available new homes for sale. That is confirmed by government figures indicating that at the end of March, there were only 144,000 new homes for sale, the lowest level since the government began collecting data in 1963. Of those, 48,000 had been finished, with the rest either planned or under construction. In early 2008, 199,000 finished homes were for sale. …

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