This morning the Times ran one of those year in review stories, this one about house prices. The story notes that, in what should not be a suprise to any sentient being, the increase in house prices of recent days appears to be a passing phase, and it's more than likely that the rate of increase will slow further. We are to believe this is a bad thing, although we are not told why, but we can let that pass. The article also notes that house prices have still not reached there previous highs, which, so far as I can tell, we are also supposed to think is a bad thing.
You would never know from reading the article that the previous highs resulted from a housing bubble, meaning they never would have gone that high if someone unlike Alan Greenspan had been in control, and that they were by definition (it was* a “bubble”, remember) unsustainable at those levels.
This amnesia is not terribly surprising, but what always surprises me (well, not really) is the fact that the role of rising inequality in the housing market is rarely mentioned, and then only obliquely. If we were talking about yachts, we might expect rapidly rising prices. But we are talking about homes. Everyone needs one, but usually only one. Some people have two, three, or, like John McCain, can't remember how many they have. But there is simply not enough demand for excess housing generated by the 1% to have a significant impact on national home prices, particuarly since the rich tend to segregate themselves. If wages are stagnant or declining in real terms, it stands to reason that home prices cannot, absent a bubble, increase very much in the long term. People can't buy what they can't afford. Basic laws of economics (of the common sense variety) would dictate that housing prices should remain relatively stable. The quality of our housing stock might decline, since the cost of improvements, to the extent any individual homeowner can afford them, will be harder to recover. The solution, of course, it to reverse the flow of money to the top. Until that happens, housing prices will only rise if the banks are allowed to create another bubble, which, I admit, they are likely to do as soon as the government agrees to look the other way.
Post a Comment