Another Housing Bubble is Starting

[DC Al Fine]

Everything I've read about the housing bubble tells me it wasn't having the bubble itself that was the problem, but the fact that it was overinflated by bad bond ratings and a sneaky investment scheme that encourage poor loans.  Is that wrong?  Was that not regulated out?  Is it not possible to have a healthy booming housing market?

Yeah sure, provided the demand is there to create it. The question is, does America really have enough demand to raise housing prices significantly?

[DC Al Fine]

I'd say erratic shifts in housing prices are an independent "bad" apart from the credit risk (e.g., finance) component. At the most basic level, housing is a requirement for living. Particularly owning a single-family house is both the best financial decision for a family that lives in the same metropolis for more than 15 years or so, and a virtual requirement to be accepted as truly middle class. Housing should be affordable.

IIRC some Yale economist showed that over the long term, housing more or less tracks inflation. If you can save money by renting and invest the difference, you would be far better off.

That said, given people's saving abilities, forcing them to send a cheque for a fixed amount every month is probably a good idea.

[DC Al Fine]

Part of the bubble is because of cash investors who then rent the properties.  Instead of an "ownership society", we're looking at a tenancy society due to increasing home prices with no employment changes.  Home price increases without corresponding wage increases is terrible.

Could you expand on that a bit? What do you mean by a tenancy society existing while people keep buying homes?

[DC Al Fine]

Part of the bubble is because of cash investors who then rent the properties.  Instead of an "ownership society", we're looking at a tenancy society due to increasing home prices with no employment changes.  Home price increases without corresponding wage increases is terrible.

Could you expand on that a bit? What do you mean by a tenancy society existing while people keep buying homes?

People who own 6-8 homes and then give them out for rent. This is especially true in the poorer parts of America where homes sell for less than a new car.

I remember going with dad back in the day - I guess it was the early to mid 1990s, before the big upswing - to look at 'packages' of houses for sale.  Older white slumlords, in the mood to retire, selling of 10-30 houses in black or mixed neighborhoods for about the price of one or two houses in a 'good neighborhood'.  These were typically rented 'section 8' by the government, and were good investments, but my father just couldn't make the leap - he was only into trailer park slum-lording, which to his mind was much safer, though the return was far less.

It's funny how my uncle, who is into this business as a second job, loves section 8 housing even though he is anti-government in other cases. These days he is especially interested in buying houses in South Atlanta suburbs...for obvious reasons. I have been to these neighborhoods, in many cases looking the same as any other well off suburb....except for the fact that they are filled with Blacks. And houses are cheap as a result....

If they've been rented section 8 for any amount of time, I doubt their condition is good compared to a comparable house in another suburb. You know the deal. Tenants don't pay their rent and the landlord never repairs the place.