The Housing Non-Crisis

The home ownership rate is a bad measure of economic prosperity.

WSJ editorial. Excerpts:

"As the housing boom turned to bust, the ownership rate fell to 66.5% in late 2010, and it has kept falling. Banks aren’t making liar loans anymore and credit standards have tightened. Isn’t that what the politicians who passed Dodd-Frank wanted?"

"the myth that owning a home is the key to middle-class savings and a driver of economic prosperity.

A home is valuable as a form of shelter but it is not typically a good investment."

"Michael Milken cited research going back to 1890 showing that the annual inflation-adjusted return on houses was barely above zero."

"Housing is best understood in economic terms as a form of consumption, not investment."

"The home ownership rate becomes destructive to the larger economy when it is used to misallocate resources to housing from other parts of the economy. Government policy heavily subsidizes housing via the mortgage-interest tax deduction, the low down-payment rules of the Federal Housing Administration, and the taxpayer mortgage guarantees of Fannie Mae and Freddie Mac.

When these subsidies were supercharged by the Federal Reserve’s negative interest rate policies in the early and mid-2000s, they created the housing bubble. Those policies misdirected capital away from what might have been more productive economic uses. And in the end they created an unsustainable boom that ultimately took down the entire U.S. economy."

"In certain markets in particular—California—government has also imposed barriers to cheaper housing with zoning laws, environmental rules and other building restrictions."