The Deadman Night Rider

A forum for evening students of the SMU Dedman School of Law and other outlaws..

Saturday, December 27, 2008

Structural Shift

From the real estate section of yesterday's New York Times:

“In 1985,” he said, “50 percent of households had children at home. In 2000, that was down to 33 percent. Today it is 29 percent, headed to 25 percent.

“That means that 75 percent of home buyers over the next 15 years will have childless households — and within that group are empty-nester baby-boomers, or couples or singles buying a first house. And that means that three out of four home buyers will have no interest in a house in the suburbs with a good school system, which is pretty much what we’ve created over the last 50 years.”

Mr. Otteau cited a new study from Virginia Tech projecting that a nationwide surplus of 22 million suburban homes on lots larger than a sixth of an acre will be languishing on the market by 2025.

The article notes that some counties surrounding New York City have almost two years worth of backlog inventory in residential real estate. Since home construction (not sales, construction) drove over a third of the economy for the last eight years, it's not surprising that we're in a deep recession. Hopefully we'll realize that putting people that don't need them in these homes just to put people in homes is not the way to go. Here's how Professor Posner sums up our recent housing policy:

“Home ownership policy of the Bush and Clinton administrations was, in essence, an attempt to pay low-income people to make a risky investment that they would otherwise rationally avoid. I cannot understand why anyone would think that such a policy would be sensible. In some cases, these people will do well and enjoy the upside of their investment, but in other cases they will do poorly, with the result that they will be worse off than ever.”

Unfortunately, this same logic may be about to be deployed in the realm of 'job creation':

Speaking of digging holes, Obama also wants to spend $60 billion to "provide financing to transportation infrastructure projects across the nation." He says "these projects will create up to two million new direct and indirect jobs and stimulate approximately $35 billion per year in new economic activity."

Fixing a bridge, widening a highway or building a light rail system may or may not make economic sense. But the fact that it involves paying people to operate jackhammers and pour concrete does not make it any more worthwhile. If creating jobs can justify transportation projects, why not fill the country with bridges to nowhere?

First, houses for no one, now bridges to nowhere. Both are what happen when we let sentimental notions (houses are good, jobs are good) override analysis.


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