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Housing Market Health: It Depends on Your Point of View

September 8th, 2010 categories: For Buyers, For Sellers, Lake Tahoe Real Estate

Is a House a Luxury or a Staple?

The article says the housing industry is confusing. Well, duh!

What it doesn't say is if the New York Times, or any other news media adds to that confusion. But that's another story.

The story here is today's New York Times article, which is not to be confused with the article yesterday about whether the housing industry should be allowed to collapse or not (our piece on that here).

Today's article suggests that one's opinion as to the state of the US housing industry depends on one's point of view. After this stunning revelation, the article goes into further detail (there is always something to be thankful for).

The article points out that at "times, real estate seems to be in the early stages of a severe double dip. Home sales plunged in July, and some analysts are now predicting that the market will struggle for years, if not decades."

(Again, and we are exhausted with the media trumpeting of a US July existing sales report, with attendant modifiers such as "plunge", "unexpectedly deep" and an "Acapulco size cliff dive" … that culminated in only a 7-sale difference… in one month in South Lake Tahoe- here.)

The article then points out that "others argue that the worst is over." It further states that Karl Case, the real estate economist and that Case in the Case-Shiller price index), recently wrote, “Buying a house now can make a lot of sense.”

Here's where the POV thing comes in :
The author of the article, David Leonhardt, says he can’t claim to clear up all the confusion. But he does suggest a means to determine if one should be more or less bearish about housing health: does one believe that housing is a luxury good, or does one think housing is more like food, clothing and other staples?

More illusory housing health stuff! If one believe housing is a luxury good, then one will think house prices will rise nearly as fast as incomes and that houses today aren’t terribly overvalued. If one believes housing is a staple, though, prices will rise more slowly .

Leonhardt says the difference between these two views is the subject of an intriguing debate, presumably that one where some esteemed economists say one thing and others say another.

After digging into it, the author comes closer to the luxury good side POV, which is to say the less bearish one. To him, housing does not rank with unemployment, the trade deficit, the budget deficit or consumer debt as one of the economy’s biggest problems. But then again, others will disagree.

For more on real estate economic pontification and illusion, here. In the meantime we're looking forward to focusing tomorrow on something we do know about, and that would be what is happening in South Lake Tahoe.