In a previous post I outlined one of the central problems behind the credit market crisis: plummeting house prices. Although most people have a general understanding of how much housing construction took place at its peak, the chart below illustrates how much (over)building took place during the boom. Compare that to what is happening now, which is likely the most precipitous decline in homebuilding ever recorded by the U.S. Census Bureau. Indeed, if the current pace holds, 2008 could nearly equal 1982 for the dubious honor of lowest calendar-year total of new construction of single-family homes. While it is tough for certain industries to endure such a steep plunge in home construction, this adjustment in construction activity is a critical step in the eventual stabilization of house prices.