The study by the Joint Center for Housing at Harvard (and MIT, that is why it is “joint”) that Jim Bacon noted in the 14 June posting “Housing Bubble Watch…” was also covered by WaPo. Their spin is that the Joint Center does not see any sign of the housing bubble bursting yet BASED ON 2004 DATA. (“No Slowdown in Housing Market Seen, Report Says.” 13 June 2005)

That is good news for housing speculators, you made it to 31 December 2004. Of course it is now nearly half-way through 2005…

A review of the report confirms many of the negative trends outlined in “The Shelter Crisis,” 23 May 2005 at and adds some new factoids.

The WaPo story on the Joint Center report offers no guidance on when the bubble might break. Far more important, there is not even any discussion of the much greater negative impact of not having a housing bust. If housing prices (aka, the cost of shelter) do not come back into the realm of reason for the vast majority of citizens, the economies of prosperous regions are in for a major “readjustment.”

The next question is what will be the overarching impact of a slow fizzle of the housing balloon as predicted by Janszen of Always On noted in today’s post by Jim. No doubt there will be an effort to stem the bust but will it work? The real issue is: would a fizzle save the economies of the regions that now have “More, Better Jobs?” Those Creative folks can move in a hurry.


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  1. Ray Hyde Avatar
    Ray Hyde

    From today’s

    “Fairfax, once a bedroom community for the District of Columbia, now boasts more jobs than the region’s core.

    Prince William, which, for a time, was viewed as the region’s most affordable community, has gone upscale overnight with 4,000 half-million-dollar homes delivered last year alone.

    And sleepy Loudoun is now among the fastest growing counties in America.

    “Where will we put all the people who move to this region?” asked Connolly, noting that Fairfax has practically run out of room to build more homes.

    “We’re beyond our ability to produce a sufficient amount [of housing],” said York,….”

    Sometimes I just don’t know what planet EMR lives on. My mother is about his age, and she has been predicting a re-emergence of the great depression all her life. I imagine that one day they will eventually both be right.

    If the jobs go away, everybody will hurt, and those who are overextended or undersupported to begin with will hurt sooner. What else is new?

    We can’t all take in each other’s laundry: eventually someone is going to have to make something. Housing, it turns out is one of the few things that we haven’t figured out how to export the manufacture of and the Alway’s on article notes that construction has been one of the bright spots in the economy recently.

    I suppose you could argue that we are effectively exporting construction cash flow as well, considering the number of aliens in construction, but it is beside the point.

    Absent gross unemployment, one way to get housing prices back in line is to get government out of the business of preventing growth at the behest of special interests claiming to be the fount of all knowledge.

  2. Yeah…EMR…my question for you would be this:

    How long do you think the housing bubble can keep up with amazing job growth in NOVA? We’re at the beginning of an upturn in the economic cycle. In theory, this should be the big time for job growth.

    BRAC throws a wrench in the situation…but I think that relates more to the office space bubble.

  3. Jim Bacon Avatar
    Jim Bacon

    Ray, Solid fundamentals always undergird any financial bubble. That’s how the wild-eyed optimism of the bubble gets started. In the case of Northern Virginia, the region has the strongest job growth in the country combined, as you observe, with the perceived inability to increase the housing supply in core jurisdictions. (I say “perceived” because the restrictions are those that the jurisdictions themselves pose, limiting densities, interfering with the efforts of developers to “recyle” neighborhoods, etc.) Whenever you have growing demand and restricted supply, prices will rise. No question, there are solid fundamentals underneath the NoVa housing boom.

    Just as clearly, there are excesses. Credit terms have eased, making it possible for an increasing percentage of the population to enter the home-buying market on easier terms. There is more speculation as well. People are willing to pay higher prices on the expectation that prices can “only go up.” When real estate prices rise 20 percent in a year, there is a huge speculative component to the price rise.

    I hate to make predictions. I’m not “predicting” a collapse of the housing bubble. What I am saying is this: Given the speculative nature of the bubble, fed by easy credit, there is a significant risk that the housing bubble will collapse or, alternatively, that it will result in a prolonged slow deflation of housing prices. To my mind, anyone is foolish not to consider the risk. And that includes municipal governments, which appear to be ratcheting up their spending as if there were no end to the housing boom in sight.

  4. Ray Hyde Avatar
    Ray Hyde

    I’ll buy that. Especially the part about jurisdictions bringing it on themselves. It will be intersting to see how they pass along the cost of affordable housing back to those that have done so well on their homes. Also agree that it is a bad idea to institute new long term spending based on these phantom profits. Buying a few new cruisers is one thing, hiring a few new teachers is something else.

    Otherwise home risks are usually things you recognize and accept: termites, neighborhood becomes less desirable, overextended to buy in the first place, speculation, etc.

    But what is the alternative? Enron? UAL Retirement plan? Money market at 1%? Unless things go very wrong and you lose the home, you at least have shelter. If it is overpriced by 20% and then stagflates back to the mean, you haven’t really lost anything, unless you were planning to move anyway.

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