Economics Made Easy

Brian Wesbury and Robert Stein write a regular column in Forbes Magazine. I like these two guys and how they break down complex economic concepts so even simple folk like me can understand. They are not big fans of the pork-laden bailout, and they back their laissez faire philosophy with simple examples from the real world. Here's how they explain the housing market and new home construction:

Take home building: There are about 130 million homes in the U.S., according to the Census Bureau. In December, the latest data available, home builders started houses at a 550,000 annual rate. In other words, at the current pace of housing starts, it would take 236 years to replace all the homes in the U.S.

To put this in perspective, homes are normally built at a pace that would replace the existing stock of houses every 75 years. Unless you can imagine everyone living in Thomas Jefferson's Monticello--first lived in 239 years ago--this is impossible to sustain.

Assuming we eventually get back to the normal "replacement rate" of 75 years, housing starts will have to go up to 1.75 million, a dramatic climb from the current 550,000 pace.

You can read the complete article here.

http://www.forbes.com/2009/01/26/stimulus-slow-growth-oped-cx_bw_rs_0127wesburystein.html