The Myth of Overbuilding

On the general subject of recession myths, here’s another statistical look at the myth that the speculative boom in land prices led to some kind of crazy amount of overinvestment in houses. What we have here is building permits divided by change in non-institutional population. In other words, new buildings per new person.

You can see here that for a relatively brief period from 2004-2007 we were in fact building an unusually large number of housing units per capita. But since then we’ve been building an unusually small number of housing units per capita. And the bust has been both longer in duration and larger in the size of its deviation than the boom ever was.