Edward Glaeser – The Benefits Of Modest Housing Prices – “There is plenty to like in low and stable housing prices, and that’s what we should now expect in a world free from bubbly delusions of constant price appreciation.”

“…the seasonally adjusted figures illustrate that since March 2009, we in the US have been bumping along the bottom of the housing market, just as we did for six years after the last housing bubble burst in 1991.
Although a new surge in housing prices might improve the macroeconomy, there is plenty to like in low and stable housing prices, and that’s what we should now expect in a world free from bubbly delusions of constant price appreciation.” …

“Homeowners, like myself, have lost from the drop in prices, But homebuyers have benefited an equal and offsetting amount.
Cheap homes make it easier for young families to buy. Given that our public policies tend to be rigged against the young, who will have to pay the cost for our current deficit and extraordinary spending on Medicare, I can’t begrudge them the benefit of lower housing prices.
In the long run, we should expect to see prices stay low in most of the U.S. We have an abundance of land. The U.S Census reports that there were 117 million households in 2010. So every U.S. household could have more than an acre of land and we’d all still fit into Texas.” …

“I hope that housing prices continue to be modest for decades so that ordinary Americans can afford to buy, and I see little good in government policies, like the homebuyer tax credit, intended to artificially boost housing prices.
My greatest hope, however, is that prospective buyers have learned the lesson of the past decade: Housing prices go down as well as up. The right reason to buy a home is not as an investment, but as a place to live a fulfilling life.”

– excerpts from ‘What’s Not to Like About Stable Housing Prices’, Edward Glaeser, Bloomberg News, 29 May 2012

Our thanks to ‘Zerodown’ for alerting us to this article, and who adds: “A smart, contemplative article. Even in 2006 I heard the view that expensive real estate is a drag on the real economy because it hogs capital itself and encourages capital intensive projects like trains and roads to suburbs (where people seek affordability). All this capital should be put to more productive use.”

9 responses to “Edward Glaeser – The Benefits Of Modest Housing Prices – “There is plenty to like in low and stable housing prices, and that’s what we should now expect in a world free from bubbly delusions of constant price appreciation.”

  1. Good comments. Low rates are not free money in net, they are acting as a redistribution. The US has rebalanced, for the most part. Canada has not.

  2. I want to live in a world free of bubbly delusions of constant price appreciation! What a wonderful turn of phrase…the article pretty much summed up how I feel about housing.

  3. Also note the comments about divergence of metro areas and restrictions on building. While Atlanta had few restrictions on building its economy was hit hard by the downturn because of its reliance on construction employment. Boston, conversely, has seen land prices appreciate in real terms, has a smaller construction economy, and had avoided the worst of the boom.

    So to whom should Vancouver harken? The reliance on construction employment is somewhat of a concern.

  4. Renters Revenge

    “The reliance on construction employment is somewhat of a concern.”
    You think?
    http://www.threadless.com/product/1466/Now_Panic_and_Freak_Out

  5. Love it. I recall this quote from The Herald circa 2007 or so (UK paper, sorry, no active link):

    “We were all corrupted by the housing boom, to some extent. People talked endlessly about how their houses were earning more than they did, never asking where all this free money was coming from. Well the truth is that it was being stolen from the next generation. Houses price increases don’t produce wealth, they merely transfer it from the young to the old – from the coming generation of families who have to burden themselves with colossal debts if they want to own, to the baby boomers who are about to retire and live on the cash they make when they downsize.”

    • ” the coming generation of families who have to burden themselves with colossal debts if they want to own”

      “If” indeed. If the coming generation of families says no to high prices, I don’t have to think much more than a microsecond about where prices will head. Is something stolen if it’s given?

    • Just say no.

    • I thought the younger generations were pretty savvy about product marketing, when will they start to see through the marketing messages … uhm … “advice” coming from older generations and media?

  6. Pingback: Vancouver Condo Info » Friday Free-for-all! » Vancouver Condo Info

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