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The employment problem is precisely why I do not think the housing market will ever "recover". Housing prices did not crash, they simply aligned themselves with

The employment problem is precisely why I do not think the housing market will ever "recover". Housing prices did not crash, they simply aligned themselves with current and forecasted salaries. Attempts at raising housing prices to "normal" levels is a fools game. Create the jobs and the salaries first and the rest will follow.

cglace 14y ago
I don't understand why everyone wants housing prices to go up. As a person looking to buy a home in the near future I certainly do not hope the housing prices head towards their prerecession levels.
- phillmv 14y ago
  Why, they're investments. Of course you want prices to go up! You're sinking a huge quantity of money - presumably, above that of an equivalent rental unit in your region - and by golly, you need returns on that or else you're just fritting it all away. It's all compounded by the fact that housing is the only major asset investment that the vast majority of people ever engage in.
  - Joeri 14y ago
    They're only an investment if you buy more housing than you need. After all, you need housing, so when you sell that home at increased value, you will need to use that revenue to buy new housing which has also risen in cost. In short, only if you can sell your home and buy a cheaper home can it be considered an investment. Otherwise it's just non-liquid capital.
    - plorkyeran 14y ago
      In theory, if you buy enough housing to fit a few kids then you'll have more housing than you need by the time you're looking at retirement, so you can cash out your 'investment'. Of course, in reality this never seems to actually happen.
      - theorique 14y ago
        Lots of people are doing this / have done exactly this. My parents and many of their generational peers (boomers +/- 10 years) did the large house thing in the 1960s-1980s in order to raise the kids, then sold their large house and moved to a smaller house or condo as the kids moved out in the 1990s-2000s.
- saosebastiao 14y ago
  Because people are fooled into thinking that houses are investments as opposed to places to live. They all feel like fools for buying high, and want the world to adjust to their expectations.
- mgkimsal 14y ago
  Once you buy one, you'd certainly not want the prices to go up. Indeed, you may in fact want them to go up.
- prostoalex 14y ago
  Economic models suggest greater economic activity around housing booms - it boosts capital flows, job creation, employment for blue-collar workers. That's why "housing starts" is an indicator watched by economists and investors. That's the macro-economic view, and is usually favored by governments, who can create economic waves by tweaking incentives in one industry. From micro-economic perspective you're right, the cheaper the better, money you save on not paying your mortgage will be deployed somewhere else.
ChuckMcM 14y ago
You are perhaps correct, SF Bay Area housing has pretty much 'recovered' to its 2009 levels in terms of resale. I don't agree with your assertion of the 'alignment' however. To support such a claim you would have to show that house prices were a dependent variable of salary, and my observations over the last 20 years of home ownership has not shown that correlation.
spamizbad 14y ago
Housing prices are already being "inflated" by the low cost of mortgage debt. If interest rates climbed to something like 6-7% for a 30-year mortgage you'd see values drop.
akgerber 14y ago
A lot of this country is "built out" under current zoning regimes which require auto-oriented detached single-family construction in most of the country, which is extremely land-intensive compared to traditional walkable urbanism. Because land use in most of this country is very tightly regulated to prevent densification (or even cause de-densification in a lot of cities), most construction of new housing units has been on greenfield land at the outskirts of cities, so housing affordability has been correlated to access to new greenfield land at a city's edge, first via streetcar and street, then via expressway. As the interstate highway system has been completed, and all developable land within a reasonable driving distance of the most economically successful metro areas has been built on, people have instead been forced to bid up existing housing, hence the ridiculously high housing prices in most coastal metro areas and ongoing gentrification of central neighborhoods in these cities. Moreover, as time goes on, many people who've grown up in single-family-only, automobile-only neighborhoods have discovered they like walkable urbanism better, and the current zoning regime guarantees it is in short supply in many markets. Hopefully, we realize the economic folly of mandatory suburbanism as time goes on, and work to allow urbanization (a/k/a private property being used as its owners desire) in many mandatorily suburban areas now. It's happening to some degree already in Virginia: http://www.nytimes.com/2012/12/19/realestate/commercial/a-suburban-wasteland-in-virginia-gets-a-modern-urban-feel.html?pagewanted=all&_r=0 http://www.nytimes.com/2012/12/19/realestate/commercial/a-su... http://dc.streetsblog.org/2011/10/27/transforming-tysons-corner-a-high-stakes-suburban-retrofit/ http://dc.streetsblog.org/2011/10/27/transforming-tysons-cor...

cglace 14y ago

I don't understand why everyone wants housing prices to go up. As a person looking to buy a home in the near future I certainly do not hope the housing prices head towards their prerecession levels.

phillmv 14y ago
Why, they're investments. Of course you want prices to go up! You're sinking a huge quantity of money - presumably, above that of an equivalent rental unit in your region - and by golly, you need returns on that or else you're just fritting it all away. It's all compounded by the fact that housing is the only major asset investment that the vast majority of people ever engage in.
- Joeri 14y ago
  They're only an investment if you buy more housing than you need. After all, you need housing, so when you sell that home at increased value, you will need to use that revenue to buy new housing which has also risen in cost. In short, only if you can sell your home and buy a cheaper home can it be considered an investment. Otherwise it's just non-liquid capital.
  - plorkyeran 14y ago
    In theory, if you buy enough housing to fit a few kids then you'll have more housing than you need by the time you're looking at retirement, so you can cash out your 'investment'. Of course, in reality this never seems to actually happen.
    - theorique 14y ago
      Lots of people are doing this / have done exactly this. My parents and many of their generational peers (boomers +/- 10 years) did the large house thing in the 1960s-1980s in order to raise the kids, then sold their large house and moved to a smaller house or condo as the kids moved out in the 1990s-2000s.
saosebastiao 14y ago
Because people are fooled into thinking that houses are investments as opposed to places to live. They all feel like fools for buying high, and want the world to adjust to their expectations.
mgkimsal 14y ago
Once you buy one, you'd certainly not want the prices to go up. Indeed, you may in fact want them to go up.
prostoalex 14y ago
Economic models suggest greater economic activity around housing booms - it boosts capital flows, job creation, employment for blue-collar workers. That's why "housing starts" is an indicator watched by economists and investors. That's the macro-economic view, and is usually favored by governments, who can create economic waves by tweaking incentives in one industry. From micro-economic perspective you're right, the cheaper the better, money you save on not paying your mortgage will be deployed somewhere else.

ChuckMcM 14y ago

You are perhaps correct, SF Bay Area housing has pretty much 'recovered' to its 2009 levels in terms of resale. I don't agree with your assertion of the 'alignment' however. To support such a claim you would have to show that house prices were a dependent variable of salary, and my observations over the last 20 years of home ownership has not shown that correlation.

spamizbad 14y ago

Housing prices are already being "inflated" by the low cost of mortgage debt. If interest rates climbed to something like 6-7% for a 30-year mortgage you'd see values drop.

akgerber 14y ago

A lot of this country is "built out" under current zoning regimes which require auto-oriented detached single-family construction in most of the country, which is extremely land-intensive compared to traditional walkable urbanism. Because land use in most of this country is very tightly regulated to prevent densification (or even cause de-densification in a lot of cities), most construction of new housing units has been on greenfield land at the outskirts of cities, so housing affordability has been correlated to access to new greenfield land at a city's edge, first via streetcar and street, then via expressway. As the interstate highway system has been completed, and all developable land within a reasonable driving distance of the most economically successful metro areas has been built on, people have instead been forced to bid up existing housing, hence the ridiculously high housing prices in most coastal metro areas and ongoing gentrification of central neighborhoods in these cities. Moreover, as time goes on, many people who've grown up in single-family-only, automobile-only neighborhoods have discovered they like walkable urbanism better, and the current zoning regime guarantees it is in short supply in many markets. Hopefully, we realize the economic folly of mandatory suburbanism as time goes on, and work to allow urbanization (a/k/a private property being used as its owners desire) in many mandatorily suburban areas now. It's happening to some degree already in Virginia: http://www.nytimes.com/2012/12/19/realestate/commercial/a-suburban-wasteland-in-virginia-gets-a-modern-urban-feel.html?pagewanted=all&_r=0 http://www.nytimes.com/2012/12/19/realestate/commercial/a-su... http://dc.streetsblog.org/2011/10/27/transforming-tysons-corner-a-high-stakes-suburban-retrofit/ http://dc.streetsblog.org/2011/10/27/transforming-tysons-cor...