Are We Really in a Housing Crisis?
April 18, 2009 Leave a Comment
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Zywicki’s research indicates that different parts of the country experience different sets of problems when it comes to real estate. In other words, one size doesn’t fit all which is essentially what he argues the Obama Administration is trying to do with its housing policy. Zywicki points to three distinct types of housing markets that exist today:
1. A balanced market where smooth adjustments occur between supply and demand and prices will rise and fall accordingly. Places such as Dallas and Charlotte are prime examples of this type of market. Personally, I see the Lancaster market as fitting into this category. Historically, most of the price adjustments (up or down) have been gradual which means that our capitalistic system works.
2. A constrained market where geography or land use controls naturally cause price volatility. He sites New York, Boston, San Francisco and Washington D.C as markets that exhibit large swings in real estate prices. Because of their unique geographic locations, it’s pretty tough to expand housing into the Potomac River or the San Francisco Bay. It’s always been that way and will continue into the distant future. People who live in these areas expect big price swings and, by and large, understand it.
3. A market where rapid expansion of homes leads to oversupply and exuberance which ultimately leads to wild price swings. Las Vegas, Phoenix and Tampa are the poster children for this type of market. In these areas, ordinary investors calculated that a lot of people would either retire or buy a second home there. As prices started to creep up, so did speculators’ interest and before you knew it – a bubble developed. This is where you’ll find the real personal tragedies and foreclosure problems.
Instead of frightening people by talking about the end of the American dream, Zywicki argues, the Obama administration should offer reassurance, stressing the specific, limited nature of the foreclosure problem. “Heck,” Zywicki says, “41 out of the 50 states have foreclosure rates below the national mean.” The latest check of foreclosures in Lancaster County, as compiled by RealtyTrac, shows that 1 in 1,821 properties in March of 2009 had received a foreclosure filing at some point during that month. That translates into .055% of homeowners in the county. Zywicki contends that the vast majority of the country is experiencing the natural effects of supply and demand and needs nothing more than to stand back and let the markets clear.
“Assistance for the relatively small number of people who are facing really tragic circumstances makes sense,” Zywicki says, “but if the administration tries to push overall housing prices back up, it will only be asking for trouble. We overbuilt. That’s the reality. And not even Obama can change it.”
Hmmm – your thoughts?
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* Robinson, Peter. “The Housing Crisis Isn’t a Crisis.” Forbes.com. 09 Apr. 2009. 17 Apr. 2009 http://www.forbes.com/2009/04/09/mortgage-bankruptcy-foreclosure-opinions-columnists-zywicki.html?partner=daily_newsletter.
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