Wednesday, June 25, 2008

The reason behind the housing glut

Housing demand is linked to population growth. Only a handful of people own more that one home, and most people share a home with a spouse or roommate. Most first time home buyers are in their thirties and twenties. Thirty years ago, the baby bust was still going on. Fewer babies 30 years ago mean fewer homes sold today.

To me, a crisis is when there is too little of something. If there were so few homes that many people were forced to live on the street, that would be a crisis. It is always better to have too much than too little. Since the housing glut meant that I bought my house for $30K, I like this glut just fine. The person who sold it to me doesn't like the glut one bit.

But the buyer's market should end by itself in the next decade. No doubt that the next president will take credit for that. But the real reason why demand will go up is because the birth rate went up during the 1980's. So I can expect to sell my house for $40K ten years from now, assuming the perceived hazards of living in my neighborhood remain the same. (The key word is "perceived". It doesn't matter if a neighborhood is safe, it only matters if the buyer thinks it's safe.)

Aside from traveling back in time and impregnating as many women as possible, there is little that McCain, Obama, or Barr can do about the so-called housing crisis. The best way for the next president to increase housing demand is to make it easier for people to legally immigrate to the US.

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