January 08, 2015
The NYT badly misinformed readers by telling them that Obama was easing up on Federal Housing Authority lending rules to fix a “lagging” housing market. Actually home sales are slightly above their population adjusted pre-bubble level. In fact, if we took account of demographics (the increasing portion of elderly that is constantly used as a justification of low employment rates) then house sales are above pre-bubble levels. Also, inflation-adjusted house prices are 15-20 percent above trend levels.
It is true that builders are not building as many homes as would be expected, but this is explained by vacancy rates that are still relatively high. The lower homeownership rate is likely the function of the weak labor market and also that the “flexible” labor market touted by most economists means that people have to change jobs frequently, which often means moving. People who have to sell their home shortly after buying it end up building wealth for the real estate and financial industry, not their family, which is an important reason why fewer people are becoming homebuyers.
This piece also wrongly asserts that, “rents are soaring.” This is not true by the usual definition of “soaring.” The Bureau of Labor Statistics owners’ equivalent rent measure rose 2.7 percent over the last year. This measure excludes utility fees that are often included in apartment rents, which is appropriate since homeowners also have to pay for utilities.
Owners’ Equivalent Rent: Percent Change Over Prior 12 Months
Source: Bureau of Labor Statistics.
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