Remember in 2008 when the experts were calling for nationwide housing destruction to allegedly save the U.S. economy from falling housing prices? It’s something to contemplate as experts like Ezra Klein ask in 2025 “How many more homes” we Americans supposedly need. What producers of smartphones, cars and bananas would give for Klein’s crystal ball…
Briefly pivoting away from a consumptive market item the quantity and complexity of which no one, including actual developers, can possibly understand, we can then contemplate alternative market messages found in the price of houses. It recalls another source of excitement for pundits who ascribe to themselves an ability to read the minds and yearnings of 330 million people: “affordability.” Supposedly the people who populate the richest, most opportunity-laden country on earth are struggling to get by. Really?
Or is it more truthful to say that at a time of endless choice, Americans are discovering they can’t have it all? Please think about the previous question while you’re thinking about housing. At risk of talking our book, Jack Ryan (former Goldman Sachs partner, and founder of REX Realty) and I did just that with our book Bringing Adam Smith Into the American Home.
We make the point that housing isn’t just consumption, it’s of the kind that a lot or a little deprives Americans of crucial mobility in pursuit of the opportunity that most elevates their unique skills and intelligence. Only for the folly of home ownership to grow.
While we Americans pursue productivity and wage-enhancing specialization on the job, with the alleged “dream” of home ownership we suddenly find ourselves managing the proverbial sailboat that we daily, monthly and yearly rip up countless hundred-dollar bills vainly trying to maintain. Is it any wonder that home “owners” dread the routine visit of plumbers, HVAC technicians and handymen “explaining” costly and very “necessary” fixes?
To which the experts will say housing represents the best investment for Americans chasing some kind of “dream” that is nothing more than the experts obnoxiously ascribing feelings to Americans that they couldn’t possibly know. Nonsense. With actual investments, Americans don’t routinely encounter huge bills just to maintain their ownership stake.
It’s a reminder that housing isn’t investment, it’s once again consumption that takes place to the substantial detriment of mobility, specialization and actual investing that over any reasonable timeframe promises exponentially greater amassed wealth. Which asks readers to once again contemplate nosebleed housing prices.
Contra Klein and countless other experts on the left and right, the price signal isn’t a call for more public-private partnerships (Klein and the left), reduced zoning restrictions (right), or policy altogether. Ryan and I argue for a lack of government meddling so that prices can drive truly knowledgeable decisions, including the revelation that home ownership is powerfully inimical to wealth and wellbeing.
From there, we offer no solutions while cheering choice. Among other things, those choices might be Americans turning away from home ownership so that they can truly invest in themselves and their family’s future, all while capable of migrating to present and future opportunities in frictionless fashion. Put another way, it’s possible nosebleed home prices are a beautiful market signal directing Americans away from what is so costly in so many ways beyond the actual price of houses.
We say this while cognizant that for quite some time the symbol that is Wall Street has matched capital with entrepreneurs on the path to making everything – from cars to computers to supercomputers in our pockets – affordable. We speculate that Wall Street paired with discontented entrepreneurs will eventually come to the housing rescue much more effectively than governments egged on by crisis-obsessed experts trying to bend a screaming market message with more taxpayer money, policy, or both.