As sales of new homes reach historic lows, there are increasingly strident calls for Washington to do something. These demands for action, however, fail to recognize that it was government, mostly Washington, which got us into this mess in the first place. Decades of subsidies for the housing industry have resulted in booms and busts that have repeatedly undermined the strength of our financial institutions while leaving the nation with a massive inventory of vacant homes.
The rental vacancy rate is just shy of 11 percent, while owner vacancy rate is approaching 3 percent, both close to double their historic average. In a nation of about 130 million homes, we have almost 19 million that are vacant. Almost 7 million of these are being "held off the market' awaiting better market conditions. Seven million is close to annual record for combined new and existing home sales. It should be painfully clear that our housing markets are facing a problem of way too much housing. Any increase in new housing starts should be a signal for tears, not optimism.
Mark A. Calabria is director of financial regulation studies at the Cato Institute.
Recent Comments