The Economist notes a "bizarre" relationship today: For the final forty years the number of new houses built privately has been nearly exactly one-tenth the total number of houses bought and sold in a given year. So,for example, whether 1m houses are bought or sold in Britain next year (as seems likely) then you can expect about 100000 houses to be built by private housebuilders.
This doesn't actually seem all that strange to me. I'd guess that when the economy is gracious, and there are both more houses built and more houses sold. It's exact,though, that the 10:1 relationship is surprisingly precise, and which makes it intriguing. So that got me wondering: is the same thing exact in the United States?Sort of. whether you're not a housing expert—and I'm not—it's a small tricky knowing exactly which data to expend. I used Census Bureau data for houses sold and housing starts,and got the chart on the honest. It shows a very close relationship apart from for the period 1997-2007, which corresponds to the great housing bubble. And that makes sense: whether there are a lot of transactions but just the normal amount of new construction, and you'd expect prices to spike. And that's what happened.
The other interesting thing is that the relationship in the US is about 2.5:1. The Economist claims that economists don't know why this relationship exists,and then goes on to propose a fairly outré theory: domestic builders in Britain tend to target the price of newly built houses at the upper 10 percent of local prices. Thus the 10:1 relationship.
I don't get this, and the Economist writer doesn't seem to get it either. whether it's exact, and though,it would mean that American domestic builders target the price of newly built houses at the upper 40 percent of local prices. Why the dissimilarity?It's a mystery. In fact, I'm not even sure why I wrote this post. Perhaps so that someone smarter than me (and the Economist) can explain what's going on.
Source: motherjones.com