Posted on 01/08/2006 7:36:18 PM PST by paltz
Not often do Rush Limbaugh and New York Times columnist Paul Krugman agree on anything but recently both of them pointed out the same pattern in the prices of housing -- and both were correct.
The pattern is this: Despite hysteria over high home prices, in most parts of the United States housing is quite affordable. But in some places housing prices are astronomical -- three times the national average in much of California, for example.
Despite the old rule of thumb that housing should cost no more than one fourth of your income, there are parts of California where tenants and new home buyers pay at least half their incomes for housing.
This can be a serious problem in such places because it means that only the other half of people's income is available to pay for such frills as food and clothing.
These dire situations are more likely to be featured in the media, partly because bad news sells newspapers and gets higher television ratings. Moreover, media elites are more likely to be living in the places where housing prices are out of sight -- places like Manhattan, coastal California, and the posh suburbs around Washington or various other cities.
It is a very different story in most of the rest of the country. A scholarly study published in the October 2005 issue of the Journal of Law and Economics concluded: "In the sprawling cities of the American heartland, land remains cheap, real construction costs are falling, and expanding supply keeps housing costs low."
In some cities, housing prices have actually declined as the housing supply has expanded. None of this is rocket science. It is supply and demand.
Why then are there particular places where housing costs have skyrocketed?
In those places, much of the land is prevented by law from being used to build housing. These land use restrictions are seldom called land use restrictions.
They are called by much prettier names, like "open space" laws, laws to "preserve farmland" or prevent "sprawl," "greenbelt" laws -- or whatever else will sell politically.
People who already own their own homes don't worry about whether such laws will drive housing prices sky high. Somebody else will have to pay those prices while existing homeowners see the value of their property rise by leaps and bounds.
Meanwhile, land that might otherwise provide homes for others becomes in effect free park land for themselves, while such upscale communities use "open space" laws to keep out the masses. The crowning touch is that such self-interest is depicted as idealism.
A famous economist named Joseph Schumpeter once said that the first thing someone will do for his ideals is lie. Some people distinguish little white lies from black lies but the biggest lies of all are green lies.
To hear environmental zealots tell it, they are just trying to save the last few patches of greenery from being paved over. But in fact the land area of the United States covered by forests is more than three times as large as the land area covered by all the cities and towns across the nation.
Only about 5 percent of the land is urban. In other words, you could double the size of every city and town in America and still nine-tenths of the land would be undeveloped.
Some of the biggest hysteria about "saving" land is found in places where most of the land is already off-limits to building. Some of the biggest crocodile tears about a need to "preserve farmland" come from people who are not farmers, and who know little and care less about farming.
Chronic agricultural surpluses that cost the taxpayers billions show that there is too much farmland producing more than the market can absorb, while the growing of these surplus crops puts all sorts of chemicals into the ground, water, and air. But the green liars don't mention that.
Their real agenda is keeping out other people. Home builders who would enable other people to move into their community are called selfish and greedy. Green liars consider themselves morally far superior to "developers."
These "problems" are mutually exclusive results of any policy that will ever get implemented with regards to zoning laws, and the left doesn't get called out on the contradiction. The result? Problems forever, victims forever. A ready-made leftist constituency no matter what the realities on the ground are.
Location. Location. Location.
Placer County has aggressively been buying up land under a program called "Placer Legacy" and if you do some research you will find that home prices here are going into orbit.
Kids grow up and are forced to move because they can't afford to live where their parents raised them.
I can tell you that the situation described in this article is EXACTLY the case in Boulder County, CO where I live. The looney lefties in the city of Boulder control the county government, and have instituted a "Land Use Code" that has made land to build on almost unobtainable, and the regulations that must be met to build a home almost unaffordable.
The net results are that the lower income and minority populations have been driven out and only trust babies, the wealthy, or those that have lived here forever and own their homes outright now remain. Yet these same lefties wring their hands and bemoan the plight of the "less fortunate". What hypocrites!
Monday: Protest to stop a developer from building new housing.
Tuesday: Protest against the lack of affordable housing.
This is a dumb argument. If I earn $40K in Iowa and spend $10K on housing, I have $30K left to spend on food, clothing, transportation, and entertainment. If I earn $80K in California and spend $40K on housing, I have $40K left to spend on food, clothing, transportation, and entertainment. The fallacy of the argument lies in the fact that food, clothing, transportation, and entertainment costs about the same in Iowa as in California.
One great thing about this situation and going into healthcare: the money is better in rural areas. Earning potential is greater in rural Colorado or southwest Virginia than Manhattan.
Judging from what I've heard from others, it's far easier to envision setting up a practice in a more rural mountain setting, earning my income while living in a larger home with more land, far more easily affording the opportunity to do charity work, and then buying that place in Hawaii and calling it quits.
I can dream, right? Ha!
Yep. Then on Wed protest cutting down trees, then go home to their house constructed of wood.
Protest against gas-guzzling SUVs on Thursday.
Friday, drop off the Lincoln Navigator for servicing...
You forgot taxes. Out of 40K in Iowa you'd have 33K left from which to spend your 10K. Out of 80K in CA you'd have left about 63K, from which to spend your 40. In both cases you are left with the same 23K for other needs, but 23K goes further in IA than in CA [gas prices, mundane costs like parking fees and the like].
But the whole point of living in high-cost areas is to make a very large income indeed.
It is only in a few very small areas that there are many jobs and professions that pay over $200K a year. People with high skills go to those areas, and don't care how much they pay for housing.
Hypocrisy is a very important trait of Liberals. Do you notice that the most expensive places in the country are mostly populated by liberals? Those liberals who tell us all the time how they care so much about middle class and poor Americans.
Dr. Sowell is correct in what he says, but the analysis ignores another major reason for the higher prices in some areas. This is that more people want to live there because they are beautiful or are more desirable for other reasons.
Even in an unrestricted real estate market, San Francisco only has so much room. If more people would like to live there than there is room for, they will bid for the available housing and the price will go up.
There is only so much coastline. Even if it were all available to be built on, the strictly limited supply ensures high prices for a limited "good."
Good, they shouldn't keep living with the parents after they grow up anyway.
What is the median income for CA? Expenses do indeed vary. California fuel prices are higher and taxes are higher. You are right that maybe the rule of thumb is not a good one but if you are buying a car and sending kids to college having half your income go for housing is going to leave you with little for anything else. I always suspect someone of being one of those "making a killing in the housing market" when they so glibly disregard real world issues with "you can always quit smoking and drinking or save money by cutting back on your entertainment" and then suddenly your housing woes will disappear. Yes, oh yes, that is so Christian an attitude, never any responsibility for fleecing your neighbor, it only matters when the government does the fleecing.
Most people don't live in the 80k range. The median income in California does not exceed 60k, furthermore today people get considerably less for their money where as in the past it took one wage earner to purchase a house now two wage earners are required to pay the same mortgage and people make considerably less in inflation adjusted dollars. Even if you go by $ per square foot (people are buying bigger houses) people are getting less real value per dollar for their money.
It is clear that a combination of government and corporate collusion has made it more costly to purchase a house in America and still maintain the same quality of life for our children and families. Banks are making a killing on the foreclosure merrygoround in this market. It is a pretty good deal, take a few years of payments, get the house back, and sell it again to some poor fool who can't afford it. It is some racket, would make most bookies proud.
http://www.census.gov/hhes/www/income/statemedfaminc.html
http://www.tpmcafe.com/story/2005/12/29/175142/70
http://www.realestateabc.com/homeguide/reo.htm
http://www.washingtonpost.com/wp-dyn/content/article/2005/05/29/AR2005052900972.html
http://www.census.gov/apsd/www/statbrief/sb93_3.pdf
I agree with Sowell's thinking but wonder about his numbers.
5% of US land is not urban, and cities do not cover 1/3 as much land as forests. Both figures are absurd.
Not to get all tin foil, but I wonder if his original figures have been edited?
Same hypocrisy as the "environmentalists" (Bobby Kennedy Jr., Algore, Hufington) who demand more renewables and hybrid cars before they go off to protest a proposed wind farm near their Nantucket mansions, or drive off in their SUVs (or his wife's SUV in Kerry's case).
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