Paul Krugman Wonders What Raghuram Rajan Is Talking About
Liquidationism Further Refuted

"Houses Have Increased Their Preference for Being Vacant"

Ryan Avent reads Alex Tabarrok:

Aggregate demand: Think of the unemployed houses: THIS is an interesting thought experiment, courtesy of Alex Tabarrok, who notes that America's housing vacancy rate is at record highs and writes:

House prices may be sticky but they have fallen a lot--maybe not enough--but they have fallen a lot more than have wages.  On the other hand, house prices rose a lot more than wages. Maybe house prices are sticky relative to the required variation in market clearing levels.... Is the problem structural?  It does seem that we have too many houses in the South and the West where the boom was concentrated.  If we think of the unemployment rate as a measure of where there are too many houses then the following figure shows that there is a positive correlation between the home vacancy rate and the unemployment rate.  It's not as tight as one might expect, however.  California, for example, has a high unemployment rate but a home vacancy rate slightly below the national average and many states such as Wisconsin have plenty of unemployment but a very low home vacancy rate.

Mr Tabarrok concludes, "My guesstimate is 50% AD, 25% sticky prices, 25% structural." There are plenty of ways to play around with this version of the underemployed resources scenario, and I encourage you all to do so. But I have to say, I'm rather partial to this explanation, from Mr Tabarrok's comment section:

Houses have increased their preference for leisure.