No Market Cookie

Let's talk about the failure of the housing market! Housing statistics are about the most boring things I can think of, after corn futures! So let's go for it!

Seriously, my heart raced a little last week when I read the following 2 successive Harper's Index entries: "Chance that a U.S. home is currently vacant: 1 in 35," and "Rank of this among the highest recorded vacancy rates in U.S. history: 1." That's sounds informative, I thought! What does it mean?

I had no clue, so I did what Harper's must have done, namely consult the US Census Bureau data. The picture that emerged from that excursion into surveys, tabulations, and estimates was surprisingly interesting, as I will now attempt to convey.

The 1 in 35 bit refers to homes that would ordinarily be occupied by the owners, rather than rentals. Just that much vacant housing of that type alone accounts for something on the order of 2 million vacant homes, nationally. Given that there are only about 700,000 Americans homeless at any moment, says HUD, that means the entire homeless population could fit in said housing, one each to a vacant home, and still have enough left over to house the homeless of Canada, England, Australia, and probably Western Europe in the same plush way. Since the average home is meant to accommodate somewhere between 2 and 6 residents, you could probably house 10 times the US homeless population in the vacant homes we are talking about, even if HUD's counts are way off.

Now, that's not fair, because every market has to have unused stocks of goods to keep it fluid. But when you look at rental vacancies it's a whole different situation.

A full 1 in 10 of all rental units are going vacant in this country. That means that even though less than half of all housing is rental housing (now we're counting apartments, but NOT motel or hotel rooms and NOT summer cabins and NOT rooms at shelters) we're talking about a terrific mondo quantity of vacant units. Altogether, counting all such vacant units and adding in the vacant homes, 18.6 million units of housing are going unused in this country, as of the 2nd quarter of 2008, while the aforementioned homeless people try to find nice bridges to sleep under.

That means there are more than twenty empty housing units for every person in the country who desperately needs housing.

That's way too much unused stock.

What's a market failure?

A market failure is an American-style supermarket opened up in the middle of a Third World slum offering tomatoes at $3 a pound to people who make $3 a month.

A market failure is a Chad street vendor trying to sell jalapeños to drought victims.

What we have here is a failure of the US housing market to deliver affordable housing. To paraphrase someone I wish I never heard of, you don't house the people you want, you house the people you have.

Fun Exercises -- Learn Through Play!

1. Henry Ford had the idea to pay workers high wages to make cars so cheap the workers themselves could afford them. It worked. Why is that idea called liberal now? Why don't conservatives want to own the ideas that have been proved to work in the past? Isn't that what "conservative" means? Keeping what works?

2. This writer has offered no explanation for the failure of the US housing market. Try to think of your own. Here are a few suggestions: a) Aliens did it. b) We've been too chummy with the People's Republic of China, blame Nixon. c) We've been too chummy with the Saudis, blame the Bushes. c) Government housing regulations have something to do with it. d) Al Qa'eda.

3. An exercise in perspective. List twenty successful markets in America. Here are a few to get you started: The Japanese appliance retail market. The banana market. The energy drink market. The potato market. The politician market.