2010 July 14 Wednesday
Press Coverage Favors Higher Housing Prices
An article in Forbes about the real estate price double dip illustrates a recurring problem with housing market press coverage: Forbes covers housing prices from the vantage point of sellers, not from the vantage point of buyers.
U.S. housing values will fall 3% in the coming year, with the heaviest blows dealt to Las Vegas, Portland, Ore. and Seattle, Goldman predicts. With an eye toward high home-vacancy rates or rising mortgage delinquencies in these cities, the bankers projected values there would drop 4% to 12% in the coming 12 months.
Even if the darkest forecasts don't come true, the slippage so far this year is discouraging. Many homeowners had been hoping that home values would rise again this spring like they did in the spring of 2009 (they rose 8% between March 30 and mid-August, by Radar Logic's measure). That clearly hasn't happened during the most recent house-hunting season.
Why is a decline in prices a dark forecast? In most markets if prices fall this is seen as a boon for buyers. But in housing higher prices for sellers are treated as unalloyed good news and the flip side of higher prices for buyers is ignored.
If buyers pay more that does not mean they are getting more. Higher prices do not offer buyers any benefit. Higher prices mean that buyers have lower buying power. Higher prices mean lower living standards.
The obvious needs to be stated: the second round in housing price decreases now underway will make housing affordable to millions of people for whom home buying was previously not possible.
Dude, what makes you think people want low price housing? Low price housing = trash living next to decent folk. It means trash moving in and destroying the few good schools left. No one wants trash being able to buy a house.
Forbes is part of the delusion parade of those who refuse to see the housing bubble for the fake speculative bubble that it was. They cling to the delusion that the housing price increases represented real wealth creation. The Forbes people have drunk as much of the Kool Aid as everyone else.
Forbes writes from the perspective of baby-boomers who view their house as their retirement fund.
Red, a marginal decline in prices won't attract trash. Trashy folks tend to congregate in trashy neighborhoods where housing prices or rents are far lower than elsewhere. And these neighborhoods tend to attract some demographics such as young single artists or hipsters, who don't mind living next to trashy folks and can keep things from spiraling out of control.
And let's not forget that higher home prices mean higher real estate taxes. Who is thirsting to pay more taxes?
Also notice how the $8k new home buyer tax credit was presented as a benefit to new home buyers when all it did was allow sellers to jack up their prices by $8k or so.
Looks like 2010 may be another bad year for housing - over 1,000,000 foreclosures.
1. home ownership has been a cornerstone of the American way of life, it is especially important in creating the middle class (by allowing average people to become property owners)
2. big fluctuations in home values (i.e. an unstable market) are bad for home owners and discourage buying
Hence, an unstable housing market = disincentive for average American families to buy a home = a disappearing middle class and a country unsafe for democracy
Home ownership is fine. But it is no better or worse than any other economic good. There is no reason for the government to subsidize it one way or another. It is the subsidies that create the marketplace distortions in the first place. Get the government out of the industry (e.g. either completely privatize Freddie and Fannie or shut them down) and the marketplace will work out fine.
It was justifiably a cornerstone of the American way of life when median incomes were at a much higher level relative to house values. When my parents bought their house in a NJ suburban commuter town 1961, the guy next door, a bus driver, could own and comfortably raise a family.
That house sold two months ago for $540K.
Statewide, median house prices are well in excess of 3x median income, which itself is probably higher than that of young families wanting this American way of life.
So for all too many, houses have become the cornerstone of debt slavery and even bankruptcy.
Higher prices or lower prices - the real problem is that young, white couples don't want to live in ever-expanding Hispania, and that will always command a premium above what most couples can afford. They want to live in neighborhoods with good schools, good parents, good kids, and good neighbors who take care of their property. They don't want neighborhoods where they feel like they've just moved to Mexico.
Good luck with that, and thank you, Bill Clinton and the Bush's!