Colleagues and Friends:
What constitutes a housing "crisis"? Do we face a housing crisis when home prices are spiraling upward (as they did between the mid-1990s and 2006) or when they are tumbling downward (as has occurred during the past two years)? Or both? The problem is that, under both scenarios, the gap between incomes and home prices persisted beyond what any reasonable society should allow. Why? Don’t blame builders, or bankers, or landlords, or homeowners. They were doing what we expect them to do—maximize their returns. We face this crisis because the federal government has let “market forces” and greed dominate the nation’s housing. Speculation and boom-and-bust cycles will persist until they are reigned in by government. Government is necessary to make business, and markets, act responsibly. Without it, capitalism becomes anarchy. Without clear groundrules, every segment of the housing industry—builders, banks, brokers, landlords, investors, and others—becomes so short-sighted and greedy that they don’t see the train wreck coming around the corner. The major housing problem facing the U.S. is the gap between what people earn and the price of housing. We can’t solve the problem unless we deal with both wages and housing costs. Drawing on a number of studies and recent trends, I discuss this topic in a column on Rooflines, the blogsite of the National Housing Institute. I refer you to my column, but also encourage you to go to Rooflines' homepage, look at the diversity of topics discussed there, join the conversation yourself, and become a regular Rooflines reader.