In his 2008 book The Ascent of Money, Niall Ferguson observed that the English speaking peoples are obsessed with housing, and that “No other fact of financial life has such a hold on the popular imagination.” By extension, Ferguson might agree that no other market good brings out the stupid within American pundits, economists, and politicians like housing.
To see why, readers should Google “housing affordability crisis.” Though be careful if so. Paraphrasing the great Christopher Buckley, your computer might explode.
Not only is it accepted wisdom from the experts on the left, right, and in all religions in between that there’s a “housing affordability crisis,” these same experts claim intimate knowledge about how to fix the alleged “crisis." Paraphrasing James Carville, it’s “build more houses, stupid.” Better yet, they all know the number required to fix the alleged problem they think they've diagnosed: “four million new homes.”
Yes, quite stupid. Imagine an expert spilling similar amounts of ink on the “economy’s” need for specific numbers of computer chips, waffle irons, and tater tots.
Really, what do the “experts” mean by “housing affordability crisis”? Wasn’t it similarly a crisis in 2008 when too many Americans owned houses?
It's never seriously asked just what the housing crisis is. Exponentially more Americans can’t own a Ferrari, but one guesses a Google search of “Ferrari affordability crisis” would hardly register – if at all – on the search engine. It’s also difficult to imagine a fruitful Google search of “private jet affordability crisis” or “Golconda diamond affordability crisis."
In response, some will surely say that Ferraris, private jets and rare diamonds are impractical, consumptive items that people can’t live inside. Ok, but home ownership is practical? Perhaps not contemplated enough is the abject stupidity of going substantially into debt to own something (admittedly with a bank) requiring nosebleed monthly mortgage payments that are merely the beginning of the costs faced by fractional, half, or 100% owners of living spaces.
As most homeowners will attest with growing amounts of resignation, the costs of home ownership are in no way limited to mortgage payments. Much worse, the costs burden home owners who frequently haven’t a clue about what they’re paying for, or not, when they shell out sometimes oppressive sums each month (what’s your answer when you’re told you need a new, $20,000 furnace?) to maintain their dwelling. Talk about impractical.
Which brings us back to the prices of U.S. housing that allegedly signal an “affordability crisis.” How odd that a market signal is evidence of a crisis to begin with, but odder is that ownership inaccessibility is automatically perceived as a problem. Perhaps it’s a helpful market signal as prices invariably are.
While homeownership is worrisome and costly for reasons well beyond the agony of paying the monthly mortgage, the stock market does your monthly worrying for you at almost no cost. You can’t live in the stock market, but you also don’t need to own a home to live in one. Which is the answer to those who mindlessly contend that housing consumption is an "investment" in an appreciating asset since, you know, there’s not enough housing. Wrong.
Housing is costly, impractical consumption that takes place to the substantial detriment of savings and wealth generated. Which means the out-of-reach cost of housing is a helpful and beautiful market signal, albeit one that promoters of the so-called “housing affordability crisis” narrative remain oblivious to.
