President Obama has announced a special program of assistance for home owners in the five states that have been hit hardest by the housing crisis. The proposed program is targeted at California, Florida, Arizona, Nevada and Michigan, where house price declines are more than 20% from the peak of the bubble.
The greatest losses occurred in California, Florida, Arizona and Nevada (see note), where peak to trough house price loses exceeded 40% in all 12 metropolitan areas over 1,000,000 population except Jacksonville. These markets accounted for 70% of the gross housing value loss in the nation before the Lehman Brothers collapse. House prices were driven to unprecedented levels of up to four times historic norms by overly prescriptive land use regulations (“growth management” or “smart growth”) that makes land unaffordable.
Average losses were more than $175,000 in the markets of these states, more than 10 times those in traditionally regulated markets such as Atlanta, Dallas-Fort Worth, Houston, Indianapolis, Kansas City and Cincinnati. These intense losses were beyond the ability of the mortgage industry to sustain and it is generally acknowledged that this precipitated the Great Recession.
Smart growth had nothing to do with the Michigan price collapse. There, the strong economic downturn pushed prices down even as the state escaped without a housing bubble.
The President’s program means that the nation is now paying twice for smart growth policies. The first payment was, of course larger, which cascaded into the huge household wealth losses in the Great Recession.
Note: While Las Vegas and Phoenix are sometimes perceived as not having prescriptive land use policies, the Brookings Institution ranks both metropolitan areas as toward the more restrictive end of the regulatory spectrum. These overly prescriptive regulatory environments are exacerbated by the fact that in both metropolitan areas much of the developable suburban land is owned by government, and is being auctioned, though at a rate less than demand. These factors combined to drive auction prices per acre up nearly 500% in Phoenix and nearly 400% in Las Vegas during the housing bubble.
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Alan Greenspan (remember
Alan Greenspan (remember him), former secretary of the Ayn Rand institute had indicated in hearings in front of congress that he was mistaken, in believing that the financial industry would self-regulate, to protect it's own interest.
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Financier is shameful, and
Financier is shameful, and then we made a mistake. But the situation is slowly getting better.car dvd players
what do high housing prices prove?
The fact that there was a bubble in real estate prices doesn't prove that the cause was a scarcity of housing. In fact, the housing construction data shows that there was a huge surplus of housing constructed during the 2000s. The housing price bubbles in Phoenix and Las Vegas occurred during a period when far more homes were being built than the housing market could absorb. However restrictive the land use regulations are supposed to be in Las Vegas and Phoenix, those regulations did not prevent massive overbuilding of homes for the better part of a decade.
The misguided folks who blame smart growth policies for the housing bubble share a lot in common with those who blame CRA or the Fed... they refuse to believe that markets can fail, so they look to blame government regulation whenever one does.
Yup
This site is full of people "who refuse to believe that markets can fail." In fact, they will continue to say that it was other regulations and not the market. Here in Florida we are dealing with one of those people, but he is our Governor!
Large developers are to blame - not policy
Here in Minneapolis we had home prices 35% above the national average in 2006 because of land developers out bidding each other every time a tract of land (far away on the outer egde) became available. What was $20,000 an acre quickly grew to $30,000 ultimately to over $150,000 an acre for a corn field 40 minutes drive (with no traffic) from downtown. Same in Phoenix, and the same in Las Vegas - why? I can tell you policy had zero to do with it. The major land developers grow by acquiring a local builder - thus that small time builder now has multi-billion dollar backing and its headquarters is far far away. The majors leave the local builder to judge their own local markets and have quite a bit of freedom in their purchasing choices. The commonality to these markets is that all have an unusually large number of national builders competing with each other. Each of those builders are (were) under pressure to tie up land so their competition would not get it, and each went on a bidding war to foolishly ultimately destroy the local economy of these major cities.
Surprisingly true
Wow ... Rick Harrison coming out on the right side for once. Guess all it takes is a real wacko like WC to make you seem in bounds! HAHA!
cherry-picking of data is misleading.
Smart-growth policies had nothing to do with the housing bubble. The bubble in question was caused by deregulation of the financial industry.
Alan Greenspan (remember him), former secretary of the Ayn Rand institute had indicated in hearings in front of congress that he was mistaken, in believing that the financial industry would self-regulate, to protect it's own interest.
Please do a little real research. In our area, Portland, considered the "Smart Growth" capital of the nation, home values held firm, foreclosures remained fairly low despite up to 12 percent unemployment. in the meantime, areas nearby with "loose" development guidelines saw up to 30% drops in values. The powder-keg was loose development and financing, the match was a large spike in fuel prices that stifled the demand for ex-urban homes. Ignorance is bliss, and you must be quite happy.