Former Fed employee Danielle DiMartino Booth has some harsh words for both the Fed and the people who buy a home thinking it will go up in price and value…
First we get data like today that tell us everything is awesome:
From the same report, there is included analysis, which optimistically puts it:
“The trend of increasing home prices is continuing,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “Price increases are supported by a tight housing market. Both the number of homes for sale and the number of days a house is on the market have declined for four to five years. “
Here is a little perspective on just where those home price increases are taking place:
Of note is that according to the report, home prices are picking up in traditionally thought of depressed housing markets such as Cleveland and Detroit. Seattle, however, saw price increases far exceeding second place Portland.
Then, to rain on a parade, or not to rain on it, depending on the perspective, former Fed employee and banking insider does not pull the punch when she says what houses really are – utility shelters:
Before the Fed fed the fantasy, homes were a utility and provided shelter. The ingrained mindset that they’re investments lies at Fed’s feet
— Danielle DiMartino (@DiMartinoBooth) August 29, 2017
Sure enough, American’s have drank the Fed’s Kool-Aide. Here’s from the National Association of Realtors:
A vast majority of Americans believe that buying a home is a solid financial decision, and most believe they could sell their home for at least its initial purchase price, according to a new survey from the National Association of Realtors®. The 2015 National Housing Pulse Survey also found that a preponderance of Americans think that now is a good time to buy a home.
But can you blame citizens for thinking their home is an investment? Any quick search can pull up official government websites teaching citizens how they can “invest” in the purchase of their home:
Then from Jackson Hole and Janet Yellen’s own speech, however, it is not only just an investment anymore, but it is also a standard of living thing:
A resilient financial system is critical to a dynamic global economy–the subject of this conference. A well-functioning financial system facilitates productive investment and new business formation and helps new and existing businesses weather the ups and downs of the business cycle. Prudent borrowing enables households to improve their standard of living by purchasing a home, investing in education, or starting a business. Because of the reforms that strengthened our financial system, and with support from monetary and other policies, credit is available on good terms, and lending has advanced broadly in line with economic activity in recent years, contributing to today’s strong economy.
As a side note, we may have just found our new politically correct word for “shed” in “utility shelter”.
Here is the main question. With Tweets like these coming out from former Fed employees and banking insiders, is the next housing bubble pop and subsequent crisis imminent? We have, after all, just been warned…
Finally, if real estate, the traditional “hard asset” to own, and that which the majority of Americans have most of their net worth “invested in”, is not an investment but just some other durable good like a car or a dish washer, what hard assets are left standing that do in fact both retain their value and go up in value?