Click to enlarge.
Not all construction employees build houses. That said, these unsustainable exponential growth trends are quite impressive.
Should these trends continue to the year 2100, then the high point trend will have a whopping 187 construction employees per housing start. No joke. If you wish to bet me on that outcome, then I'll take the under!
It doesn't end there though. In the year 2100, even the low point trend will have a staggering 24 construction employees per housing start. I'll take the under on that one too!
This chart has long-term exponential trend failure written all over it. I would even go so far to say that it may have already failed and that we just don't have confirmation yet.
Source Data:
St. Louis Fed: Custom Chart
Fascinating chart. I wouldn't have expected older houses to have needed so few construction employees, but it makes sense being as how older houses were so much smaller than today's new houses.
ReplyDeleteRelated to this, there's a theory that the mortgage interest tax deduction is a primary driving force for our consumer economy. The idea is that the deduction causes many middle-aged workers to continually buy "up" by selling their old house and moving into a newer, bigger one. The trend towards ever bigger houses is well and good for the house-building industry, and it's good for a lot of other industries, too, because when people move into a bigger house with a lot of empty space, they tend to fill that space with new furniture, more TVs, bigger appliances, more kitchen gadgets, etc. If you take away the drive for ever bigger houses then you also take away the drive for a lot of other consumption.
Related to that, I remember once seeing a chart that contrasted actual American mean income to the average income Americans believed they needed to make to be happy. The chart ranged over several decades—such as from the 1970s to the 2000s. For every year there was data available, the "needed" income was maybe about 20% higher than the actual income. For example, if the average income was $40k/yr then people would believe, on average, they needed $45-50k/yr to be happy. So of course with all the income gains made in the last 40 years or so, we're long past the point where people back then thought they would be happy. That people haven't become any happier is evidence that for many us, we're our own worst enemy. I wish I could find this chart, but my lazy Google search didn't turn it up.
Craig M. Brandenburg,
ReplyDeleteI wouldn't have expected older houses to have needed so few construction employees, but it makes sense being as how older houses were so much smaller than today's new houses.
That was my thought too. Once again, not all of these construction workers are building homes though. Maybe we just like tearing down stadiums and rebuilding them (more than we once did).
The idea is that the deduction causes many middle-aged workers to continually buy "up" by selling their old house and moving into a newer, bigger one.
I never understood why people don't factor in the cost to move much. It's not cheap. It was my plan to buy the one house I figured I could be happy in forever and just stay here. I'm at the 15 year mark now. The plan is still working for me apparently. It's been paid off for most of it. I don't enjoy living in debt. Doesn't make me happy. Speaking of which...
That people haven't become any happier is evidence that for many us, we're our own worst enemy.
I don't need to see the chart. I'm a believer without it. Once the basic needs are met, there should be nothing stopping people from being happy. The exception, in my opinion, is a fear that future basic needs won't be met. I've got some of that in me as you can probably tell. I mistakenly ate the red pill, lol. Sigh.
Mark, Good point about the all the sports stadiums.
ReplyDeleteI never understood why people don't factor in the cost to move much. It's not cheap.
Aye.
I rent, as I've done all my adult life. And I can tell you that a lot of people think I'm "throwing money away" by renting. I heard this a lot when I moved to Phoenix in 2006, at the height of the house-buying frenzy, though nowadays people have backed off their criticism of my renting ways.
Anyway, whenever a home owner tells me about the $5k or whatever they spent to replace their broken air conditioner, I think to myself: "You buy your AC? I get mine replaced for free. Don't you realize you're throwing your money away?"
I remember back in the early 20s modeling in Python both the total cost of ownership and rate of return of owning vs renting. My conclusion was that neither is a big win over the other in monetary terms, so I ought to live where I'll be happiest. Lately, I've updated that conclusion to acknowledge the huge uncertainty (these days) of anything valued in money.
Um, the previous comment should read "my early 20s" and not "the early 20s". In truth, I'm still a young guy.
ReplyDeleteMy conclusion was that neither is a big win over the other in monetary terms, so I ought to live where I'll be happiest.
ReplyDeleteI did the same kind of analysis in Excel, right down to the costs of mowing my lawn. I kept choosing to rent (at least until I was fairly sure I wouldn't need to move). It seemed a better use of my labor to concentrate on my career as opposed to my lawn.
AC? Been there, done that (twice). Try roof! Been there, done that too. And had the exterior painted and a fence redone while I was at it. Most of my windows could use a replacement due to never ending condensation between the panes. The carpets are original and so is most of the interior paint. Oh, and then there is this. There's talk that they might run a sewer line up my street someday. That might make the roof seem like a minor expense.
Over the long haul, I'd say it costs at least 1% of the house's price to fully maintain it each year (try not maintaining it for 100 years and my point would be proven). Add on another 1% to pay the property taxes.
Houses aren't cheap. I suspect that many of the newest home "investors" probably didn't realize that back in 2004 (when I became permabearish). They were too busy looking at the 0.0% teaser mortgage offers. Sigh.
I have a friend who rents. Every time we meet up I try to tell him at least one anecdotal story about the joys of homeownership. He's coming over today. I'll be pointing out the front yard that I've been manually thatching all summer. I'm up to about 70 garbage cans of it. Almost done! Hahaha! ;)
No joke on the garbage cans. I can put out 10 cans every other week. I'm trying to get it done before winter, lol.
ReplyDeleteFortunately, I do not have to do it every year. This is the second time since I've lived here (since 1997).