No houses today, I'm afraid. Just a chart:
I mentioned this chart the other day , reproduced here with Robert Shiller's permission. (It's from the second edition of his book Irrational Exuberance .) I like this chart mostly because it confirms my own experience, which is to say that it shows with national data dating to 1890 what I have observed anecdotally in Washington since last month: The housing market is irrational. The correlation between home prices and interest rates, population, or building costs is very weak. And though prices have fallen a lot since their 2006 heyday, they still have a ways to go. The bubble lives.
About this last point, prompted by reading Daniel Gross (shameless plug: you can get that book here, and his new book here), I have been wondering: What worthwhile legacy will the Great Housing Bubble of the Early 21 st Century leave us with? The main legacy of previous bubbles, Dan writes, is infrastructure — both physical and mental. Not only do we have all this leftover stuff (telegraph lines, railroad tracks, Internet bandwidth), but all this stuff helps us think in new ways. (Why send a letter when I can send a telegram? Why ship these crates by barge when they can get there faster by train? Why waste money at the Brookstone in the mall when I can waste it at brookstone.com ?)
With the housing bubble, the legacy is less obvious. Yes, there are a lot of empty houses in America, and they're getting cheaper. And as Dan says , the housing bubble has changed the way Americans think about debt and real estate. First we learned that if we used our house as collateral, we could borrow money more cheaply. Now we're learning that if we used our house as collateral, we could lose our house.
To which I say: Is that it? Maybe we're too close to the bubble to know how it will help us. But unlike bandwidth or telegraph transmission lines or (to a lesser extent) railroad tracks, real estate is not a national resource. Thanks in part to mistakes made by now-bankrupt telecom companies in Mississippi and California, I enjoy relatively cheap Internet access in Washington. I get no benefit from the mistakes made by overzealous developers in Miami or Las Vegas.
Unless, of course, we move. How about it, Nora? You don't like the cold anyway, and I am beginning to think that America's bust will prolong Washington's bubble.