Watch how the received wisdom gets worded: “A sustained rebound in home prices is considered critical to getting the economy back on track.”
That’s from a Washington Post business report on falling home prices. Its passive voice construction covers up who holds the opinion.
The sentence could have been written differently: “Many politicians, policy wonks, and industry shills believe that only a sustained rebound in housing prices can put the economy get back on track.” But that would have helped the reader see the special interests behind the statement.
We need housing prices high and rising again . . . to fulfill the plans of the very people who set up the house of cards that just came down.
Harvard economist Jeffrey Miron’s reaction is worth quoting in full: “No, no, a thousand times no!
Housing prices are falling because they soared to ridiculous levels during the bubble. Any policy that attempts to keep prices high — or, equivalently, that attempts to prevent foreclosures or juice housing construction — is fighting a crucial market adjustment to past distortions.
The housing boom mania — fed by multiple government subsidies and massive financial intervention coupled with cheap money from the Federal Reserve — served some people at the expense of the public at large. Progress doesn’t depend on it. Real progress depends on rejecting such nonsense.
By the way, other things equal, inexpensive housing is good for us. The whole “rising prices” mania defeats the alleged rationale for mortgage subsidies in the first place.
This is Common Sense. I’m Paul Jacob.
3 replies on “The Housing Boom’s Inflated “Wisdom””
And all of the pols will just as adamantly insist that they have learned their lesson.
Housing prices have been steady at an inflation adjusted average price of about $100,000 in today’s dollars for the past 100 years. During the this last bubble, the price soared to over $150,000 per house. It’s still up in the $120s and more crashing still to come to get back to the sustainable average.
Not until that happens will the economy recover.
said that the pols and pundits don’t seem to be aware of that. Sadder still that we’re along for the ride until the market manages to correct in spite of the counter running policies.
“Sad”
Not “said”
It’s time for the American people to see housing for what it is: an EXPENSE! There’s no denying that all the money I paid in mortgage interest would not have been deductible if paid in rent and the growth in my home value would have been lost if it had been growth in a bank account – all that interest would have been taxable.
The economy won’t recover until our jobs come back. The middle class needs an income source. For a while the growth in home prices and the favorable tax treatment given to interest paid on mortgages encouraged people to borrow against their homes and that cash flow obscured the decrease in household income due to outsourcing and downsizing.
Home ownership may be the American dream but it’s not enough to build an economy. The people who buy those homes need an income source other than a mortgage.