Housing Recovery

We’ve been hearing news of housings recovery for several months in a row now. That, of course, is wonderful. One thing we can’t measure quite as easily by home sales and value stats, for example, is our cultural attitudes about homeownership. What, if anything has changed as a result of the crises and is functioning below our collective radar screens?

We know there are now over 2 million more renters. And we hear younger folks – who may have watched their own parents struggle thru a housing challenge – seem to be taking more about renting that owning as a life-strategy. Housing is well along the road to recovery, but recovery to what? What is the proverbial “new normal” where housing is concerned?

Looking at historical graphs we see ownership rates and values are not yet in line with where they predictably would have been had the crises never happened and what many folks counted on when they bought into the American Dream. An airplane only a few miles off course can end up in end entirely different the further it continues. Some are estimating that the next few years will bring future appreciation on the lower (3%) range of the appreciation ranges we’ve historically seen (3 to 6%). For now perhaps the best news is distressed sales are down from 30% only a few months ago to 12% now. Without these sales dragging values down, America's home values should continue to rise in the coming months.

The long term implications of these minor differentials particularly on America's middle class – who have historically depending on home equity for 75% of their personal wealth - can be far reaching both in terms of numbers of people and years ahead of us all. Where will personal wealth accumulation for average Americans come from if not home equity? Particularly in our nation, with the lowest saving rate of all wealthy nations?

In the big picture, our “new normal” includes a new view on just about all aspects of our financial lives. In that context, sustainable homeownership still rises to the top as a cornerstone of sound financial planning, security future prosperity for Americans individually and the country as a whole.

Shari Olefson's picture
Shari Olefson


Submitted by Sarah on

Recommend to you a book I am reading by Michael Hudson, a Professor of economics at U Missouri-Kansas City and former Wall Street economist, called The Bubble and Beyond (2012). Puts modern neo-classical and monetarist policies in contrast with their classical economic ancestors and shows how this has led to the financialization of the economy. The aim is to create asset inflation, which leads to asset bubbles (especially in the FIRE sector), debt deflation (taking productive revenue to pay interest), and econoic crisis. Capital gains are preferred to manufacturing because of their favorable tax treatment and corporatins take on debt to deduct interest and ward off hostile takeovers and leveraged buyouts. The real economy is hollowed out, jobs are outsourced and public assets are privatized.

The problem is financial capitalism has reached what Hyman Minsky called the Ponzi Phase or the Casino Stage of Capitalism aided by monetarist theory in which markets are perfect, there is no "free lunch," taxes are shifted onto labor, and the credit side of debt is considered 'wealth.' As debt compounds exponentially, it outstrips asset inflation and robs the economy of revenue to spend on consumer goods, wages and productive or real wealth creation. Eventually, debts that cannot be repaid, won't be. And the rest is history.

Today I have found another CNBC report that finds housing prices are rising too fast in some markets and predictions of another housing bubble based on speculation by Blackstone and other hedge funds buying up distressed property in bulk. David Stockman, in an interview with Yahoo Finance, echoes the concerns and warns that rising house prices cannot be sustained given the lack of jobs and the debt being carried by recent college graduates who may never be able to afford homes.

I think Michael Hudson has nailed exactly what ails our economy and dooms us to continual boom and bust cycles especially in real estate.

Finally, Hudson explains how the problem of wealth disparity and extreme aggregation has turned democracy into oligarchy in which financial interests buy off institutions like Congress and regulators in order to ensure the status quo and to frame the economic debate between one degree of austerity or another including the necessity of cutting "entitlements" and other social safety net programs which, Hudson says, will lead to a form of debt peonage.

Maybe one day, people will tire of the misery imposed by the monetarists. But not until they understand where the misery is coming from.

Alan McCall

Add new comment

Filtered HTML

  • Web page addresses and e-mail addresses turn into links automatically.
  • Allowed HTML tags: <a> <em> <strong> <cite> <blockquote> <code> <ul> <ol> <li> <dl> <dt> <dd>
  • Lines and paragraphs break automatically.

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
By submitting this form, you accept the Mollom privacy policy.