Oh boy!
https://www.nytimes.com/2017/02/10/upshot/popping-the-housing-bubbles-in-the-american-mind.html
Suppose there were a way to pump up the economy, reduce inequality and put an end to destructive housing bubbles like the one that contributed to the Great Recession. The idea would be simple, but not easy, requiring a wholesale reframing of the United States economy and housing market.
The solution: Americans, together and all at once, would have to stop thinking about their homes as an investment.
The virtues of homeownership are so ingrained in the American psyche that we often forget that housing is also a source of economic stress. Rising milk prices are regarded as a household tragedy for some, and spiking gas prices stoke national outrage. But whenever home prices go up, it’s “a recovery,” even though that recovery also means millions of people can no longer afford to buy.
Homes are the largest asset for all but the richest households, but shelter is also a basic necessity, like food. We have a variety of state and federal programs devised to make housing cheaper and more accessible, and a maze of local land-use laws that make housing scarcer and more expensive by doing things like prohibiting in-law units, regulating how small lots can be, and capping the number of unrelated people who can live together.
Another big problem: High rent and home prices prevent Americans from moving to cities where jobs and wages are booming. That hampers economic growth, makes income inequality worse and keeps people from pursuing their dreams.
So instead of looking at homes as investments, what if we regarded them like a TV or a car or any other consumer good? People might expect home prices to go down instead of up. Homebuilders would probably spend more time talking about technology and design than financing options. Politicians might start talking about their plans to lower home prices further, as they often do with fuel prices.
In this thought experiment, housing prices would probably adjust. They would be somewhat cheaper in most places, where population is growing slowly. But they would be profoundly cheaper in places like super-expensive San Francisco.
That was the conclusion of a recent paper by the economists Ed Glaeser of Harvard and Joe Gyourko at the Wharton School of the University of Pennsylvania. The paper uses construction industry data to determine how much a house should cost to build if land-use regulation were drastically cut back. Since the cost of erecting a home varies little from state to state — land is the main variable in housing costs — their measure is the closest thing we have to a national home price.
Read the full article here:
https://www.nytimes.com/2017/02/10/upshot/popping-the-housing-bubbles-in-the-american-mind.html
Since the price of housing is largely determine by land availablity it means that some areas which are geographically constrained are out of luck, one example is the bay area where between the bay (which of course could in principle be filled in at least up to the San Mateo bridge) and land on which building would be very expensive if proper measures against land slides and wild fires were used it probably could not be accomplished. Perhaps folks along the coast have to admit that they have reached in many places the natural limits to growth, and stop any encouragement of jobs moving there.
“In this thought experiment, housing prices would probably adjust.”
How about a new kind of “thought experiment” that requires all initiated “thought experiments” require civil or criminal accountability of the authors and/or the initiators? One by which, if it creates social chaos, they can’t just walk away.
When that happens, our social poets will evaporate, and housing markets will normalize again. Regardless, until comprehensive population control reform is initiated, housing prices in So Cal will continue to increase, as they should. Significant government interference will warp housing prices, as they must.
Just my opinion, and I could be wrong.
This article appears to ignore the concept of supply and demand.
Actually, if you read the article, it does not ignore ‘supply and demand’. It says that quality of life will suffer by eliminating exclusionary zoning.
So highest and best use of half an acre of land near downtown will not be a ranch house, but an apartment block.
In reading this article I didn’t see any mention of historically low interest rates. I believe a big reason of why certain homes in certain areas are so overpriced is due to these historically low interest rates. And certain individuals/investors chasing yield and going with real estate because they’ll get a bigger return on their money than sticking it in CDs, money market, savings, etc.
Time to raise the rates, Janet!
I think we should stop calling them historically low rates.
All buyers know was that rates were lower last year!