Fig. [ ]. Source: NBER Macrohistory Database
New car registrations failed to fall in 1928 as significantly as it did in 1927 starting from October, and then in the first half of 1929 it skyrocketed. Since new passenger car registrations started to decline significantly in 1929, we may estimate the spending on new passanger cars for the first eight months of 1928 and 1929 and compare it with the change in investment in residential structures. The new passanger car registrations for January-September 1929 increased by 787 thousand compared to the same period of the preceding year. According to US Census Bureau data cited in Kawai and Prasad , the average car price in 1929 was around $650. Thus, spending on new passanger cars in the relevant period increased by $511.5 mln. Based on the estimates by Balke and Gordon, the investment into residential structures fell by around $530 mln.
A potential alternative explanation of the decrease in residential construction activity may involve a rise in the rate of savings. However, the available estimates do not show any substantial increase in the saving rate in 1929. For insrance, the estimates by Saez and Zucman show that consumers’ saving rate was lower in 1928-29 than in 1927.