Housing bubbles: why are Americans ignoring reality?

The internationally recognised measure for housing production and permitting is the build/permit rate per thousand population. This is to ensure that when housing production is being discussed over periods of time, population changes are taken in to account as well. Something, incidentally, the California Building Industry Association failed to do in its report.

The California residential permit rate for 2009 is therefore a shocking one unit per 1,000 population.

Indeed I cannot recall a permit rate this low in recorded history anywhere in the world.

Yes - it’s that bad.

If Texas was permitting at the same rate for 2009, just 24,000 permits would be issued (Houston 5,600).

On an international basis at 1/1000 population the figures would be - the US overall 307,000, Canada 37,000, Australia 21,000, the United Kingdom 61,000 and New Zealand and Ireland around 4,400 each.

It is to be hoped that US urban researchers and commentators, in using the build/permit rate per 1,000 population, research and report on this serious issue with urgency.

The reason of course for these unbelievably low California permit rates is because the governments at all levels in the state have essentially banned the construction of affordable housing.

The Berlin Wall approach to urban planning if you like.

Meanwhile, back in the normal market of Houston, they are merrily building starter homes of 235 square meters (2,529 square feet) for $140,000 on the fringes ($30,000 for the land, $110,000 for actual house construction).

The Annual Demographia Surveys (5th Annual Edition (PDF 721KB)), the Harvard Median Multiples and many other income to house price studies (e.g. Randal O’Toole of Cato’s extensive work), clearly illustrate that if housing exceeds three times annual household income - there are supply constraint issues to be dealt with.

It appears too that Dr Housing Bubble is “baffled” why California had such an inordinate share of sub prime, Option ARMs and other grossly distorted mortgage structures and delights in blaming the bankers (or banksters as he sometimes refers to them) for the unholy mess that is California (the epicentre of the Global Financial Crisis).