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I disagree that it was just local factors that caused the housing bubble. The Federal Reserve cannot escape culpability; with housing loans at historic lows, the Fed sent the wrong signals to developers and buyers.
At any rate, I’m sure Dan, who was a project manager for 2,200-acre subdivision in or near Castle Rock, Colorado, will be happy to hear he played a key role in causing the housing bubble.
The problem, Frank, is that the Federal Reserve sent signals throughout the United States, but only some places had bubbles. If the Fed was culpable, there would have been bubbles everywhere.
Antiplanner,
Frankly, I don’t think the case is as black-and-white as you assert, with regards to the Fed. People don’t respond in the same way to the same incentives, especially in the case of something like housing, where multiple factors can play a role in a person’s decision to buy a house to begin with. And in the report that many of the leftist blogs referenced, the authors acknowledged that geographic limitations on land have an impact on price bubbles as well. While I’m sure that the two systems feed on each other (i.e. geographic limitations on land cause planners to regulate land to use it more carefully), the paper you cited states that “the effect of geographic constraint is particularly strong.” Therefore I don’t think we should dismiss the role of the Fed simply because the response was uneven.
Thanks for your reply.
I think there are some bubbles left to pop caused both by the initial low interest rates and by the subsequent economic fallout. Student loan debt is approaching a trillion (due to both previously mentioned factors). I think we’ll see the student loan bubble pop soon.
We also saw stock bubbles, did we not? The Dow at 14000 was the result of cheap money. Use the value of gold as a rubric for a true value of the Dow. And how about petroleum bubbles? Did we not see the price of a barrel of oil and a gallon of gas drop precipitously?
Some at Mises argue that monetary supply (manipulated by the Fed) and bubbles are closely related.
I suppose this is the fundamental difference between Austrians and other libertarians, particularly those of the CATO stripe. It seems that some in CATO hold the Fed at least partially culpable. The call to abandon fiat money is relatively timid from those same ranks.
On a side note, TI’s “trusty” servers are proving themselves to be not so trusty. Maybe time to switch to another host?
Demand was increased for several reasons. Banks lowering lending standards (pushed by Congress), was a big part of that. Owner-occupied households were almost 2/3 for decades. Then they increased from 64% to 69% in a matter of years, having fallen since. The flippers added to that demand. Adding risk to the finance industry, were existing homeowners, increasing the mortgage on their home, on the perceived increase in value.
If supply (building more homes) kept up, there would not have been the big price increases, in the restrictive markets. It’s local policies that increased housing prices, through various means, often inadvertently.
One can see where supply fell short, at keeping up with demand, by looking at the vacancy rates, usually <6%, whereas national was 9% (11% now). Although there are differences in the rates between owner-occupied & rental.
The recession is far from over. There will be inflation 10%+, more foreclosures, scarcity, disruption, riots. BO is adding to class warfare & ethnic division.
“The recession is far from over. There will be inflation 10%+, more foreclosures, scarcity, disruption, riots. BO is adding to class warfare & ethnic division.”
I’m buying gold and seeds to prepare for the upcoming race wars.
I’m half-white/half-Hispanic, so which team am I on?
“I’m half-white/half-Hispanic, so which team am I on?”
You on everybody’s or nobody’s.
Does gold have much of an intrinsic use-value? You might want to stock up on bullets for your gun instead.
“BO is adding to class warfare & ethnic division.”
If you’re a white wealthy racist, I can understand how this may be your perspective. Of course if you are missing one of those three criteria, you probably disagree with the quoted statement.
Why is it supposed that one is on an ethnic team? That thinking is wrong & racist.
How about the humans for liberty, responsibility, education & prosperity team?
If a white person has produced wealth, why are they purported to be divisive? Claiming that they are racist is.
Why stock up on bullets? Typical leftist thinking–hostility & forcing others.
Scott,
My understanding of Spokker’s post was that it was a quip poking fun at your take. I simply joined in on the fun in #7. Stock up on bullets is leftist thinking?!?!? Come on Scott. We put flowers in guns not bullets. It was a joke. Stock up on bullets, “Re-load,” “Lock-n-load,” “your with us or against us,” are not leftist talking points, they’re republican talking points.
Wealthy white people are not racist by default. Many such people voted for Barak Obama, which is why I assume that wealthy white Americans that think “BO is adding ethnic division,” are racist. I could be wrong in my assumption, but all signs obviously point, at the very least, to underlying tinges of racism.
If you want to talk about class warfare and ethnic division take a look at the income gap growth between 2000-2008 and the federal response to Katrina.
If you want to see someone take a stab at addressing ethnic division in America look at: http://www.nytimes.com/2008/03/18/us/politics/18text-obama.html
Bennett, It seemed like Spooker was being racist in picking sides/teams, regardless it was off-topic. Whatever its intent, was nonsense & divisive. I didn’t see your sarcasm related to that.
Still not sure why you want a gun. And somehow relating that to rightist thinking is similar to racism–being based upon generalization–taking one feature exhibited by some & attributing that to all & that any showing of that “item” is labeled as such.
Mass violence is usually leftist. Look at riots about trials, political ideology, trade, etc. Look at the Weather Underground & similar groups.
Looking at Katrina to say that there was bad response because of blacks is ridiculous. First off, it was the primary responsibility of the mayor, who is black. Secondly, the governor.
I didn’t make an attempt to quantify the amount of racism among the people. So, not sure why that was addressed. My point was that the Lefty-statists (BO, Dems, MSM, racist groups NAACP, etc.) are flaming racism & classism, to make worse.
What does income gap show? That proves nothing. Hate the high earners?
Try having your egalitarian society where each person gets paid the same, even for not working. It has terrible results.
Land-use restrictions cannot be solely be accounted for the astronomical rise in housing prices in bubble cities and states. The gap is too far. Even in so called smart-growth states, there is an overabundance of supply in housing meaning that the restrictions were not too onerous in which to create a ration or under supply of homes.
Prices generally being set by simple supply and demand principles. Riverside, CA ain’t short in supply of homes! Neither is Las Vegas or Phoenix.
note: I am not denying that regulations don’t cause an increase in housing prices, they do to a degree (but nowhere near what CATOist claim). I simply don’t want to pave over Yosemite with sprawling subdivisions so we can all be cheap skates and pay less for house.
Another thing to note is that Texas — which the Antiplanner loves to associate as having few restrictions on land and how it did not have much of a housing bubble — has lots of regulations regarding lending practices that more than likely kept it from bubbling too high:
http://blogs.wsj.com/developments/2010/04/06/did-consumer-protection-laws-prevent-texas-housing-bubble/
http://www.newgeography.com/content/001680-how-texas-avoided-great-recession
(note: The comment section that brings Wendell Cox’s post that bring some of this issue to light).
I feel that ROT is trying to leverage Texas’ lending regulations (ironic that regulations helped Texas) in his advantage by spinning it as a simple land-use restrictions causing 100% of the bubble. Even withing federal policies that supposedly affect every state, cities and regions react differently to such policies, not to mention on top of that they all have different laws and regulations like mortgage lending practices (and yes, land-use restrictions).
ws,
There was not a claim that the bubble was 100% caused by restricting supply. Demand is a factor. The shortage of new supply pushes price. The crux is supply meeting demand. Local labor & other construction costs are factors too.
Geographical limits on land supply is a factor too. Somehow you seemed to think that each market has same land & it’s only policy that changes amount of land to be developed.
Who has proposed building on parks? How would the local economy operate, except for tourism? Residential use alone does not make for an urban area. You seem to be using typical lefty fallacious illogic in extremes. Urbanized areas occupy <3% of the contiguous US land. There is not a shortage.
You also expanded the topic to regulations in general. The point is regs that limit supply, those about permitting delays, added cost (sometimes just, but often funding existing residents), zoning, disallowing buildable land.
Correction: I didn’t quite phrase my opening sentence in trying to repeat what ws said.
It should have been There was not a claim that the bubble was 100% caused by land use restrictions
The dif being that there are non-policy factors affecting supply.
Oh, that article in the WSJ was a ridiculous tautological argument for there being no bubble in Texas. It basically said that because prices didn’t rise, people didn’t increase their mortgage & there wasn’t flipping. That’s like saying the crop yield was low below because of low rainfall.
The Cox article explained it well, about an open market for building to meet demand & that scarcity increases price & attracts investors (speculators).
Scott:
No offense, but your writing style is so choppy I can’t even follow what you’re saying.
There was little rise in home prices in Texas compared to other states — thus there was little of a bubble to pop. It doesn’t mean that there wasn’t foreclosures as a result of the financial crisis.
Land-use restrictions cannot solely account for the huge increase in housing prices starting in 2000.
ws, Sorry that you cannot understand my basic, specific points in brevity. Did you blame teachers when you didn’t “get it”?
Why did you just bring up foreclosures? That was not part of the discussion.
I explained how there are other supply impediments other than policy. You missed that & just repeated your premise.
Brevity and incomplete sentences are not one in the same.
The ignorant & those unable to comprehend often have excuses, which are not valid reasons. What fragments or other grammar mistakes are there? Point out out “incomplete sentences” & I can elaborate.
If one doesn’t fully understand or disagrees, it usually helps to ask questions or point out specific errors. In general, vagueness, accusation, generalization, avoidance, misdirection & falsities have become the standard for politicians, pundits & the media.
Whaddya know – Randal overstates his case again. The ‘leftist’ bloggers don’t agree with Randal’s BS assertion that urban planners caused the housing bubble. Randal is making sh– up again. Shocking, surely.
DS
Whaddya know: the ideologically preferred Glaeser doesn’t support Randal’s assertion in their latest work.
Whaddya know.
DS