Opinion: Americans still ignoring structural housing issues as Kiwis react to prevent more bubbles

By Hugh Pavletich Within this article - The Comprehensive State of the U.S. Housing Market: Learning to Love the Housing Data and Forgetting the Economic Facts. Everything you wanted to know about U.S. Housing Trends. » Dr. Housing Bubble Blog "“ Dr Housing Bubble (based in California) asserts that of the 129 million residential units in the United States "“ some 15,950,000 are vacant "“ and therefore overall the United States has a huge oversupply of residential stock. There are other United States commentators making the same assertions "“ for example Colin Barr of Fortune magazine in Housing market still faces a big glut - Nov. 10, 2009. The US Census Quickfacts (Texas page - with US figures alongside) states that the 2008 US population estimate is 304,059,724 and that the persons per occupied household in 2000 was 2.59. As societies become more affluent, persons per household should fall (note Texas persons per household is slightly higher on these 2000 figures at 2.74 per household "“ likely due to the higher Hispanic population with larger families). Conversely "“ through these  economic downturns "“ it is likely that household sizes would increase somewhat.

For example - if the persons per household overall increased from say 2.59 per household requiring with the current United States population around 117.3 million residential units "“ to say 2.79 persons per household (as economic conditions worsen) and using the US 2008 population estimate of 304 million as a guide "“ just 109 million residential units would be required for occupation, around 8 million less than was occupied during the peak of the boom. Further to this "“ significant numbers of second/vacation homes would no longer be required, as households struggle to lower their expenses through this economic phase. As an example "“ during the decade of the 1990's in Australia - as people became more affluent and family sizes decreased, household sizes moved from around 2.8 per household to around 2.6 per household "“ a factor that was a big driver of the residential construction industry in that country. Australia's population increased by about 12% through this period, as its housing stock increased by in excess of 22%. (Access Australian Bureau of Statistics for further information.) In being conservative "“ and in going back to the United States Census 2000 figures for household size overall at 2.59 persons per household, with the estimated 2008 United States population at 304,059,724 "“ this would suggest that at least 117,397,576 of the current total residential stock of around 128 million (using Census 2007 numbers) is occupied. My understanding is that there are approximately 10 million second/vacation homes in the United States "“ something Dr Housing Bubble and other "oversupply" commentators don't appear to mention. Property commentators "estimates" are always interesting of course  "“ but  - along with my own "“ should be treated with great caution. THE REALITY IS THAT THE ONLY TRUE MEASURE OF SCARCITY AND ABUNDANCE "“ IS PRICE. Over the years, Dr Housing Bubble and many other American commentators have persisted in ignoring the glaring contrasts of the California and Texas housing markets (to illustrate "“ refer latest  Houston Association of Realtors Monthly Report ) "“ where through the recent bubble years, the former bubbled out to in excess of 9 times gross annual household median income, while the latter housing stock stayed pretty much constant at 2.5 times household income. The Annual Demograpghia Surveys (5th Annual Edition), 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 (banksters as he sometimes refers to them) for the unholy mess that is California "“ the epicenter of the Global Financial Crisis. As stated previously "“ households should not spend any more than 3 times their gross annual household income to house themselves "“ and importantly "“ not load themselves up with any more than 2.5 times their gross annual household income in mortgage debt. It has not dawned on Dr Housing Bubble to date "“ that as the California bubble inflated "“ financial institutions simply had to increasingly lend outside these historic norms "“ if they wished to maintain market share. Understandably "“ the financial institutions in no doubt being acutely aware of the risks (sorry DHB "“ these people are not dumb) of this high multiple lending "“ were very keen to securitize it "“ and off load the risks to others. The only mistake they made was not offloading the risks adequately or fast enough! Herb Greenberg outlines this financial circus in Straight Talk on the Mortgage Mess from an Insider - Herb Greenberg - MarketWatch. It appears too that Professor Robert Shiller of Yale University is "terribly conflicted" about what is happening, if his recent extraordinary Fox Business television interview (Shiller on Housing: "˜I am Terribly Conflicted' « Glick Report) is any guide. Meanwhile - as the Americans are continuing to be confused and conflicted - in Australia and New Zealand there is now widespread recognition there must be structural changes put in place to ensure that these disastrous housing bubbles don't get underway again (refer Performance Urban Planning for access to New Zealand Government statements. For recent Australian news and reports "“ refer  Bottlenecks choking recovery | The Australian , More houses, not taxes | The Australian , AdelaideNow... Home ownership dream fading, say Flinders University researchers ...) Yet the Americans seem to persist in ignoring the real structural issues "“ and instead are choosing to "paper over the cracks" by financially bailing out everything in sight. Thanks, in no small measure, to the benevolence of the Chinese. Why? "”"”"”"”"”"“ Hugh Pavletich, FDIA Performance Urban Planning Christchurch, New Zealand