Why Unsold Homes Fuel Unemployment

The financial blog CalculatedRisk.com published an alarming chart today showing how excess housing inventory is hurting job seekers. Until that inventory is reduced, it is unlikely that unemployment numbers will improve.

This week the Census Bureau released the "Quarterly Starts and Completions by Purpose and Design" report for Q3 2010. Although this data is Not Seasonally Adjusted (NSA), it shows the trends for several key housing categories.

This graph shows the NSA quarterly intent for four start categories since 1975: single family built for sale, owner built (includes contractor built for owner), starts built for rent, and condos built for sale.

The number of units built for rent increased sharply in Q3. Although still fairly low, there were 40 thousand rental units started in Q3 2010, almost double the 22 thousand started in Q3 2009. With the rental vacancy rate starting to fall -- and no more ill-conceived homebuyer tax credits on the horizon -- rental unit construction has probably bottomed. This increase in construction will help a little with employment.

For a bigger version of the chart and to read more of the CalculateRisk post, see the end of this one.