Housing in Ten Words: The Baseline Scenario
The ten words are, "Housing fades as a means to build wealth, analysts say," and it is the title of a New York Times article. They say, "Many real estate experts now believe that home ownership will never again yield rewards like those enjoyed in the second half of the 20th century, when houses not only provided shelter but also a plump nest egg."
And I think they are right. Buying a house was like getting on an escalator. All you had to do was wait, and up you went. No longer. Take a look at the graph of housing prices.
3 comments:
The graph shows housing prices underwent little volatility from 1950 to the late 1990s, when they took off dramatically.
I attribute this to a relaxation (and later total abandonment) of mortgage underwriting standards. This casting aside of prudent mortgage lending standards I believe is at the root of the 2008 financial markets meltdown.
More bad news about the housing market today. New home sales are at the lowest level ever, since they started keeping track back in the early 60's. Down 12%. They are not just using the "R" word today (recession)? They are suggesting that we may be in for a "depression"! Not exactly the kind of climate that makes anyone want to go out and buy a new house?
This housing collapse can be laid at the feet of the Carter Administration and its Community Reinvestment Act AND at the feet of Chris Dodd and Barney Frank, who prevented needed oversight of Fannie Mae and Freddie Mac.
This attempt by a certain political party to have those who were financially unqualified to buy a home do so anyway has backfired, with severe consequences for the entire U.S. economy. It is an example of another attempt by Washington to social engineer this country that has failed miserably. Of course we all get stuck with the bill for their malfeasance. I hope these meddling social engineers in Washington are kicked out in the elections in November.
On the other hand, maybe if we get away from the preoccupation with housing as an investment and instead look at it a a place of residence, we can also get away from such civic cancers as HOAs.
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