Last March, I criticized the National Association of Realtors for spinning the data (really, for lying) to make it look like the housing bubble wasn’t bursting. It turns out that the Realtors’ economist who wrote that paper, David Lereah, has been widely criticized for such things.
Some call him the realtors’ equivalent of “Baghdad Bob,” the guy who claimed that American soldiers were losing to the Iraqi army.
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He even wrote a book, subtitled, “The Boom Will Not Bust and Why Property Values Will Continue to Climb Through the End of the Decade.” I usually don’t link to Amazon, but they have some great reviews of this lengthy piece of spin.
The good news (courtesy of Slate) is that Lereah is no longer working for the Realtors. The bad news is that his replacement is still predicting an “upturn.” The worst news is that hardly anyone understands that the housing bubble was caused by government planners.
The worst news is that hardly anyone understands that the housing bubble was caused by government planners.
Hahaha! Good one.
Hardly anyone understands. Sure. I’ll bet the “economist”(sic) does, but he won’t tell us why it wasn’t speculation or banks but it was solely caused by planners.
Sure.
DS
Speculators and banks have little power to constrict the supply of land for building. Governments have that power and rely upon the planners who advocate having limiting supplies available.
Banks reacted to rising costs by offering creative loans and stretching normal credit rules in order to get money to those who wanted to buy. The bending of rules created more risk but was judged reasonable by many. The availability of this money did little to fuel the bubble but was a result of high prices.
Land speculators are rent seekers. They take advantage of government controls and regulations to gamble on land prices going up. Without those government limits on buildable land I would expect land speculators (this would include houses) to find themselves not making any money and investing in more productive pursuits.
So we are back to square one where government controls on building create less supply and higher costs.
Quick: someone tell Measure 37 supporters that government regulations increase property values. At least, that seems to be the popular opinion around here.
Did Houston have a bubble?
I don’t mind telling measure 37 supporters that governement regulations increased some property values while holding others low. If you live on the wrong side of the street in some areas your neighbor benefited from increased values while you might be prohibited from doing so simply because a government drawn line is in the street.
Measure 37 is not the only regulation that has an effect on land prices. Each one can have a different effect on different pieces of land. That’s part of the problem, the uneven results and the people who use politics to rent seek through land use regulations.
Measure 37 specifically can decrease the value of property A by limiting it’s uses. Across the street it can increase the value of property B by limiting the use of property A (in effect ridding it of competition).
The problem with higher prices is that while I may realize a tidy profit selling my real estate I will overpay for the next piece of property I buy. In the long run individuals and society both lose when artificial scarcity drives up prices.
I enjoy seeing the ‘artificial scarcity’ argument. It’s a clue.
It omits so many other things like, oh, benefits that the vast majority wants and asks for. Like open space. Failing to account for the benefits of open space signals the weakness of the argument. Period. Sorry.
It’s of a piece from the overly — and purposely — simplistic arguments here that lack of supply is the sole reason for high home prices (equilibrium rents, anyone?).
Silly implications like building houses in protected Bay Area open space – a joke and a non-starter to the ~90% of the population not sharing the ideology here – fail to understand basic community needs (folks want open space and greenness).
It’s almost a joke, really, failing to see that UGBs are a result of rapid, rampant growth and the will of the vast majority to quell the negative effects of such growth. Just as some communities ask the politicians to change their zoning to keep out development that may put property values at risk.
Artificial. Heh.
DS
Well, the way I see it is that UGB’s and other building restrictions are fine as long as those communities understand that such restrictions may have some negative consequences. I’d rather see land declared as parkland than have UGB’s, greenbelts, and smart growth. But for house prices to climb to a high level with the amount of land we have here in the US means that land would have to be restricted in some way for prices to rise, at least in general.
Silicon Valley/San Jose home owner residents area all millionaires. Great ,
however, the grand kids are facing an average home price of $803,000.
The plan for them is to live in stockton 80 miles away if they want a home on its own lot. UGB creates winners and losers.
DS –
Your argument is that people like to have open space they don’t have to pay for, or to bear the costs of keeping open. They can get the planner to draw a nice little line in the dirt to preserve the open space for almost nothing. The only persons who bear the costs are the landowners who now can’t develop their property and anyone who doesn’t already own property. The one has the value of his land artificially lowered, and the others find that the remaining properties escalate substantially in price, making housing relatively more unaffordable. You’re also equating wants and needs – Bay Area residents want open space – but they don’t want to have to pay for it. Send every Bay Area resident a bill for their view and the psychic benefits of open space and you’ll see how much they really “need”.
Your argument is that people like to have open space they don’t have to pay for,
That’s not my argument at all. See how many open space bond measures were on the ballot last year.
or to bear the costs of keeping open.
That’s how the world works. It’s called a tradeoff.
HTH.
DS
Dan,
Rather than insinuate with statements like “it’s a clue” please tell us what it’s a clue to. You seem to be saying you know something the rest of us don’t but you are not quite willing to say it explicitly.
You also imply that if someone omits all the facts they are purposely misleading the reader. It is far from that. It is appropriate to assume the readers know a minimal amount of basic knowledge concerning the subject. When a person points out artificial scarcity they have no obligation to backfill all the other facts.
So in short the argument is not weak but reasonable. Period. Sorry.
Bay area examples are somewhat unique given the economic realities of the silicon valley and the geographic challenges. Open space advocates tend to be anti-growth, NIMBY’s who have recently settled in the area. The bay areas political leanings are also unique and would support more state control in land use/open space preservation.
It’s a joke really to think citizens pushed UGB’s rather than recognize them as a planner’s way of exercising control. In my experience planners want control of as much as possible.
High housing costs result from many factors and each one should be addressed. Artificial supply constraints have an effect. To ignore that would be silly.
Steve,
FUD phrases like “artificial scarcity” are rhetorical tactics. Seeing them is a clue that an ideological argument follows. The phrase, not the user, omits important considerations (you never see an ideological argument consider what I mentioned in #6 above.
And in order for UGBs to become law, they undergo a public process. The public discussed them. I guess the public wants control too.
If you want to call that an “artificial” constraint, I guess that’s your choice to spread a FUD phrase.
But it’s how things work on the ground, everywhere. It’s real, not artificial.
DS