The Core Dump

A strong conviction that something must be done is the parent of many bad measures

[By Nic Lindh on Wednesday, 30 December 2009]

Home of the dollar

Having an economy based on housing only is a bad idea. Who knew?

Despite promising myself to stop, I spend way too much time following the news. Which means I exist in a constant state of perplexity and rage.

Nothing new about that.

But lately things have been coming to a head. I don’t know if it’s all some elaborate practical joke, if I’m going nuts, or if the thought leaders out there are, in fact, completely insane.

One current source of confusion for me is the endless obsession and lamentation about housing prices. Yep, they crashed, and they crashed hard. If you, for some reason, bought a house at the top of the bubble you are now in a world of pain. And I feel for you. That really, really, sucks.

However—and here’s where I stop tracking the narrative—there was a huge bubble fueled by incredibly sketchy loans; loans that should never have been given. Those loans raised housing prices to fantasy levels, levels that priced homes utterly out of reach of home buyers.

I live in Phoenix, one of the housing bubble poster children, a metroplex where a lot of people are “paid in sunshine”—high-paying jobs are few and far between. According to RealEstate.com, in 2007 Phoenix had a median household Income of $45,474 and a median home value of $347,000.

Do those two numbers jive to you? They shouldn’t. If your household income is $45K, you simply cannot purchase a home for $347K. It’s called math. You can’t pay the vig. There’s nothing mysterious about it.

But now the bubble has burst, and home prices are back somewhere realistic. Which, again, really sucks for you if you bought your house at the top of the bubble. You are now deep in the hole. So I can see all those people desperately wanting house prices to pop up again so they can at some point actually sell their homes without going bankrupt. Granted. As for myself, yes, I enjoyed the fantasy that my house had made me rich, rich I tell you! Which I was for a while, in theory. Theory and reality are not the same. You are rich when you have the cash in hand.

But. If the house prices go back up to bubble levels, nobody can buy the houses without insane loans, and we would be back in another bubble. Which by its very freaking definition is not sustainable. Houses can’t cost more than people can afford, or people can’t buy them. Unless we can start paying our mortgages with unicorn tears, that’s just how it is.

So why am I reading all these stories lamenting the lack of lift in housing prices? Isn’t it a good thing that houses are affordable for working people again?

So people can actually, you know, live in them?

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