Rising home prices: who on earth thinks that's good news?
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Rising home prices: who on earth thinks that's good news?


Pop it now!

Moseying through the tinny yet strident “news” from the real estate markets that housing is on the rebound.  To the real estate industry and their flacks in the press, we're meant to believe any increasing equity will redound to the benefit of homeowners.  Not quite.  

Remember where it all started: the unholy triangle between activist government (everybody gets a house with NO money down) crooked to lazy lenders, and banks who wanted a piece of the action (even though they had no clue what was in those pieces).  

Even the chief economist of the National Realtors Association Lawrence Yun - the usually reliable cheerleader for rip roaring real estate markets, agrees that the future belongs to cash buyers, flippers,high-end purchasers, and people who live in areas enriched and subsidized by everybody else (Washington DC, the DC suburbs of Maryland and Northern Virginia). 

Trying to gin up a new bubble is absolutely in error.  What this country needs for a stable future is a market economy that invests in production and people, and gets a fair return on that investment.  The only thing a new bubble will do is suck away capital (and by extension labor) at a time when we need real things, not dreams of McMansions sitting in former cornfields (the number of which appears to be a state secret, or at least the secret of the banks). 

Between the idea And the reality, Between the motion And the act, Falls the Shadow (Inventory)


Bottom line: keep land and real estate prices down so the people can have decent housing and shelter.  Keep land out of collateral for loans, and tax it to make the acquisition and sale quicker and cheaper.  Let the investment go into the structure instead.  Collecting economic rents from land will go a long way to permanently extinguish booms and busts.

10 Comments to Rising home prices: who on earth thinks that's good news?:

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Mark Koerner on Wednesday, October 31, 2012 10:18 PM
Josh-- I couldn't agree with you more. Another real-estate-fueled boom will lead to another disastrous crash in the not-so-distant future. This raises a theoretical question about what "consumption" and "investment" are. In standard macroeconomic accounting, I believe "housing" is classified as a part of the "Investment" variable and not part of the "Consumption" variable. In other words, a single-family house is said to be a lot like a mainframe computer or a Coca-Cola bottling plant--and to have very little in common with a family car, a refrigerator, or a Three Musketeers bar--all of which are "Consumption" goods. This classification scheme has always seemed just plain wrong. In reality, houses are generally long-lived consumption goods. (An exception: houses used as rental properties.) If I'm right about this, then that last disastrous boom--the one that ended with the collapse of Lehman Brothers--was built on a false premise, the premise that we were "investing" in houses when we were really just cranking out a certain type of consumption good that we wanted to _call_ an investment. Houses may have a longer shelf life than Three Musketeers bars, but they are consumption goods just the same. Does this make any sense?
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Bianca on Friday, November 02, 2012 11:37 AM
Rising costs in housing - and everything else - is never good news. Thanks for your post and let's hope that prices stabilize for everyone.
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Danny Handelman on Saturday, February 23, 2013 9:39 AM
High home prices is an effective market mechanism to use the land more efficiently.


community housing Australia on Wednesday, June 19, 2013 7:26 AM
Rising costs in housing is not a good news but its also true that high home prices is an effective way to use the land more efficiently.


Morgan Kim on Saturday, November 10, 2012 1:13 AM
At this time people want personal home but home price is very high which out of control. That is why Investment gives home loan which is very helpful for everyone. Knowing about it, I am so glad....
Reply to comment


Wendy Peterson on Tuesday, November 13, 2012 1:31 AM
None, I guess! For the sudden economic fall most of the people are suffering a lot so they are looking for frugal options in everywhere so at this moment hiking the price of house is not supported anyhow. I hope the situation will be changed very soon. Thanks for noticing the important issue.
Reply to comment


Wendy Peterson on Tuesday, November 13, 2012 1:34 AM
None, I guess! For the sudden economic fall most of the people are suffering a lot so they are looking for frugal options in everywhere so at this moment hiking the price of house is not supported anyhow. I hope the situation will be changed very soon. Thanks for noticing the important issue.
Reply to comment


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Hi, The information is really interesting and engaging. Keep doing the great work.I really like your blog.
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community housing Australia on Wednesday, June 19, 2013 7:28 AM
Rising costs in housing is not a good news but it's also true that high home prices are an effective way to use the land more efficiently.
Reply to comment

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