Thanks for this detailed critique. There's a large cohort of people in America who take the position of "Gosh, there's nothing wrong!" and back it up with bad interpretations of data from folks like Horpedahl. It's why I like your income-to-housing expenses graphs for metro areas. They demonstrate how bad things actually are and also indicate how to make them better.
I owe you a clarification Jeremy. I didn't mean to lump you in with a conventional NIMBY crowd. And I do like your "green map" that you did in 2020. I'm wondering if it should include more of the southeast--at least up to the top half of Florida. That it coincides with a political "red state map" is interesting. That it also coincides, albeit more roughly, with places that are experiencing rural population decline is also interesting.
I'm still in the de-tox program for believing that rising rents and house prices are a public good--I entered that program in 2009 and I almost have my certificate of understanding. I do tend to associate real estate appreciation with a measure of the rude health of a region, but at least now I look for signs that market distortions have become so severe that they're killing the American Dream. Cape Cod is an example of that.
Thanks for the link, Jeremy. We agree on the localized land use regulations. I think my comments here also apply to the points you make in this link. We had a localized supply problem before 2008 and the federal government tried to cure it with generalized demand suppression, and that has really made it hard to understand what is happening. That is because the localized problems are straightforward. Supply constraints raise rents, and thus, prices. But these new constraints, mainly from federal mortgage suppression, work differently. They lowered prices, especially where incomes are low and credit access is more important. It didn't lower rents, though. And, so the data I highlight in this post, where rent costs are rising but mortgage costs are declining, is largely a result of the federal regulations. In your link, the cities that appear to be affordable have actually become much less affordable in terms of rent. But, the relative decline in price/rent that comes from mortgage suppression makes the average affordability in terms of price look ok. Additionally, the costs of inadequate supply fall most directly on low income residents, so average median prices in those cities are a combination of low prices at the high end and especially high prices at the low end.
I'm not sure which post best describes this process. Here is a post on mortgage affordability with tiers in Atlanta that shows how low tier ZIP codes first became extremely cheap because of mortgage suppression, which has since then more than been countered by rising rents.
A point about "why buy a house in America?": it has become a lottery ticket for an old-age pension, since pensions have been mostly destroyed.
Thanks for this detailed critique. There's a large cohort of people in America who take the position of "Gosh, there's nothing wrong!" and back it up with bad interpretations of data from folks like Horpedahl. It's why I like your income-to-housing expenses graphs for metro areas. They demonstrate how bad things actually are and also indicate how to make them better.
I appreciate Kevin's detailed critique. But I have never said "gosh, there's nothing wrong!" Here's another post (linked from my post last week) where I most definitely take the opposite viewpoint, but note that for now -- FOR NOW -- it is confined to a few specific metro areas: https://economistwritingeveryday.com/2021/07/07/zoning-taxes-the-cost-of-residential-land-use-restrictions/
I owe you a clarification Jeremy. I didn't mean to lump you in with a conventional NIMBY crowd. And I do like your "green map" that you did in 2020. I'm wondering if it should include more of the southeast--at least up to the top half of Florida. That it coincides with a political "red state map" is interesting. That it also coincides, albeit more roughly, with places that are experiencing rural population decline is also interesting.
I'm still in the de-tox program for believing that rising rents and house prices are a public good--I entered that program in 2009 and I almost have my certificate of understanding. I do tend to associate real estate appreciation with a measure of the rude health of a region, but at least now I look for signs that market distortions have become so severe that they're killing the American Dream. Cape Cod is an example of that.
Thanks for the link, Jeremy. We agree on the localized land use regulations. I think my comments here also apply to the points you make in this link. We had a localized supply problem before 2008 and the federal government tried to cure it with generalized demand suppression, and that has really made it hard to understand what is happening. That is because the localized problems are straightforward. Supply constraints raise rents, and thus, prices. But these new constraints, mainly from federal mortgage suppression, work differently. They lowered prices, especially where incomes are low and credit access is more important. It didn't lower rents, though. And, so the data I highlight in this post, where rent costs are rising but mortgage costs are declining, is largely a result of the federal regulations. In your link, the cities that appear to be affordable have actually become much less affordable in terms of rent. But, the relative decline in price/rent that comes from mortgage suppression makes the average affordability in terms of price look ok. Additionally, the costs of inadequate supply fall most directly on low income residents, so average median prices in those cities are a combination of low prices at the high end and especially high prices at the low end.
I'm not sure which post best describes this process. Here is a post on mortgage affordability with tiers in Atlanta that shows how low tier ZIP codes first became extremely cheap because of mortgage suppression, which has since then more than been countered by rising rents.
https://kevinerdmann.substack.com/p/a-brief-review-of-mortgage-affordability
I have a Mercatus paper being typeset right now that speaks more directly and comprehensively to this post-GFC phenomenon.