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I’m forever blowing bubbles

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“Bubble” is a pleasant word, isn’t it? For me, it brings back memories of childhood — real or invented — playing in the garden, blowing big globs of washing-up liquid into the air and watching them pop above my head.

But put “economic” in front of it and we have something far less pleasant. Economic bubbles are most certainly not filled with fun, although there’s obviously enough pleasure (and by pleasure I mean money) to be found in the period before the bubble pops that they keep on coming. Tulip mania, the South Sea bubble, the Roaring Twenties stock market bubble, the dot-com bubble (originally and cunningly branded the dot-com boom), all of which have culminated in property bubbles we see around the world today.

With the news this week that house prices in Ireland have dropped by 60% across the country we might ask: just how bad is the property bubble? Well, we at DataMarket have around 2,800 public datasets from the Federal Reserve of St Louis (one of the twelve regional banks that make up the central banking authority of the United States) and one recently-updated dataset that gives us some insight shows the number of new homes sold every month in the United States between 1963 and 2011. In 1963 a total of 560,000 new homes were sold across the country and by the peak in 2005 that had more than doubled to 1,283,000.

Line chart showing annual figures for new homes sold in the US from 1963 to 2010

New homes sold in the United States, 1963–2010. Annual data aggregated from the monthly data provided by the Federal Reserve of St Louis.

Then, the cliff-face. In 2008 the number of new homes sold had become just 485,000, a mere 38% of the level three years earlier. The total hadn’t been this low since 1982.

Sales kept on dropping. By the end of 2010 annual sales stood at 322,000 — the lowest yearly total on record — and for the first eleven months of 2011 the figure stands at only 281,000. Unless December is a bumper month (and house sales are always lowest in winter) 2011 looks like stealing the award for “Worst Year on Record” from its slightly older brother, 2010. The lowest month on record is November 2010 (20,000) and we may see December 2011 steal that award too.

It’s not all bad news though: unemployment is down. Perhaps things are looking up and we may not be too far away from that next bubble after all.

Written by Matt Riggott

January 5, 2012 at 10:10 am


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