The Wall Street Journal editorial page had a piece yesterday titled 'The Housing Crisis is Over'. In my view, this assessment is premature by many years.
The article's main flaws, based on my own research, are its emphasis on pricing as the key driver of housing demand, and its sole focus on the inventory of new homes, ignoring existing homes. The author puts his faith in a rebound based on the issue of affordability: house prices have come down enough that people can afford them again. Fair enough but he treats the inventory of homes with a nonchalance that ignores underlying demographic trends, writing:
Even if home sales pick up, how can home prices stop falling with so many houses vacant and unsold? The flip but true answer: because they always do.
Flip, yes. True, no. This time it will be different because of two demographic factors:
First, the supply of homes is made up not only of new home construction but also of existing homes coming back to market. And we are facing a wall of existing homes coming to market in the next 15 to 20 years. How so? Quite simple: older people will leave their homes as they age or pass away. Some of these homes will be demolished, but most will come back to the market.
Read Complete Story
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment