Wednesday, March 31, 2010

It Was a Housing Boom, not a Construction Boom

Below are BEA's indices of real investment in structures, for three types: owner-occupied housing, tenant-occupied housing, and non-residential structures (the BEA has the first two indices only on an annual basis, and so far only through 2008).

I have recently softened my view that the Federal Reserve gets little blame/credit for the housing boom. But shouldn't low interest rates make a building boom for all three types of structures? What did the Federal Reserve do to create a bias against non-residential building?



Added: Milton Recht (thank you!) pointed me to these three graphs. By one of the measures, non-residential vacancy rates were high during the housing boom. Is that a coincidence? In theory, low non-res construction activity could encourage housing construction, but it would do so by lowering housing prices rather than increasing them. Moreover, it seems that the purchase price of non-residential real estate was high (despite the perhaps high vacancy rates).







20 comments:

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Yeah, this is true. But the situation has changed greatly. Thanks for posting these diagrams. I'll use it to write my term paper

Zenchukovskiy said...

Your point of view differs from what other people say. Very interesting! I'm busy with undergraduate dissertation writing, so I cannot discuss this question right now. I just wanted to say that you write greatly!

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