It's official: The housing bubble is now bigger than the tech bubble.
The dark blue line is consumer and business spending on technology (hardware and software), as a share of GDP. The light purple line is residential investment, as a share of GDP.
In the third quarter of 2005, Americans spent 6.1% of GDP on building new homes or renovating existing ones. That's a bigger share of the economic pie than tech got at the height of the boom
To me, this has become a no-brainer. These levels of residential spending are not sustainable, guaranteeing a housing downturn in 2006 (incidentally, as far as I can remember, this is the first time I've made this forecast). And the downturn will likely be sharper than most people expect, including a drop in median home prices nationwide.
Tuesday, December 27, 2005
Bigger than Tech
The housing bubble is bigger (in terms of the percentage of GDP) than the technology run-up that everyone now admits was a speculative bubble.