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).







26 comments:

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