~~~~~~~~~~~~~~ I O 93 93/93 I O ~~~~~~~~~~~~~

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Location: LaGrange, Kentucky, United States

The opinions and interests of a husband, analyst and Iraq war veteran.


Tuesday, October 09, 2007

Housing bubble explained?

The first plausible critique of policy I've yet read.

"The Dallas model, prominent in the South and Southwest, sees a growing population as a sign of urban health. Cities liberally permit housing construction to accommodate new residents. The Los Angeles model, common on the West Coast and in the Northeast Corridor, discourages growth by limiting new housing. Instead of inviting newcomers, this approach rewards longtime residents with big capital gains and the political clout to block projects they don’t like."

This and, as Rob Long recently wrote in National Review, the inevitable market correction that comes after a trend of foolish investments (subscription required):

"When the meltdown comes — and I’m not making any kind of bold prediction here; meltdowns always come — the investors are going to blame the lenders who are going to blame the real-estate brokers who are going to finger the appraisers — and a lot of people are going to go to jail."

... I think neatly accounts for our housing situation today. Regardless of the explanation though, the practical consequences are likely to be the same:

- If you own a house and want to sell, you'll likely have to wait or ask a lower price.

- If you're renting and want to buy a house, and you have substantial cash or excellent credit, prices will continue to favor your situation.

- If you have little or no cash, and your credit is bad, you'll likely have to rent for a few more months or years until you can remedy one or the other.

For any average Joe not involved in contributing to the current mess, none of this seems all that earth-shattering.

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