by Mitch Kokai
Senior Political Analyst, John Locke Foundation
Think the last housing bubble was bad? Kevin Williamson of National Review Online has some disturbing news for you.
People complain about high prices when they’re buying, not when they’re selling, and that’s why housing bubbles are always politically popular: The sort of people who own homes are the sort of people who vote and volunteer on political campaigns and make donations. And the fact that tax revenue tends to increase as housing prices rise doesn’t go unnoticed by the nation’s mayors and governors. Renters tend to have more sensible views — you’ll never hear a renter say, “Hey, my rent is doubling this year — that’s awesome! The economy must be doing great!” But nobody listens to them.
And that’s why we’ve inflated a second housing bubble.
In some ways, the current housing bubble is even more bonkers than the last one — which, if you’ll recall, sorta-kinda almost destroyed the world’s financial system.
As of this writing, the median U.S. home price is just 3 percent shy of its 2007 peak. (Existing-home prices already are at a record high.) But that does not even begin to capture the story. In San Francisco, the median price of a single-family home has doubled since 2012. The median San Francisco home is now nearly $1.4 million, or 50 percent higher than it was at the peak of the last bubble. The median household income in San Francisco is about $77,000. Put another way: The median home price in San Francisco is now 18 times the median household income.
Does that sound like a stable position to you? …
… If the value of your home has improved dramatically, take a momentary break from dreaming about what you’ll do with that money once you cash in and ask yourself: Why? Why is my house today worth twice as much as it was five or six years ago? It’s five or six years older, for one thing, and unless you are in possession of a charming New England stone colonial, houses are not like wine, growing better with age. Maybe home prices are up because of good ol’ supply and demand, with housing construction failing to keep up with population growth. No, that’s not it, either: Housing construction is soaring, up 26 percent since last summer; needless to say, the number of U.S. households is not up 26 percent since last summer, executive amnesty be damned.