Statists blame the real-estate market for the rising price in housing. They say that before WW1 everyone could afford a house, and now you are in deep debt if you try to buy one.
Is there any truth to their claim?
Yes, and if they understood the ABCT along with a hundred other Austrian insights, they’d also know why their claim is true.
-Jon
How is market defined? Is the real-estate market just the price or houses? Or does it entail the ability to get a loan from banks? Or even some other factor?
If we search for the root of the problem, it is the Fed and its centralized controle of interests rates, not the “market” on its own.
Yes, loans from banks are also considered, but we’re not from the U.S., we’re from Europe. I’m from Romania and the anti-capitalist is from France.
I’ve never heard that. Suburban home ownership as we know it today did not exist until after WW2.
Of course people are in debt when they buy house. Its not because of the real estate market, though, its because of the dollar market. Which one of those markets is cornered?
If you aren’t willing to sell yourself into debt to get a home, there will be someone else who is willing to. Supply and demand. The problem lies in the unnatural and dishonest(and criminal) availability of credit created by our banking system.
Anyone could probably afford a low-end pre-WWI quality house now, if they were still being built. No electricity, no indoor plumbing, no Corian countertops, etc.
The Fed Factor is part of it, but the cost of borrowing is on the whole lower than it’s been for most of the 20th century, and the effects of inflation on the relation between home prices and income is not imediately clear.
The more important factor is direct regulation. Zoning increases land prices by creating artificial scarcity. Regulatory hurdles impose huge costs on construction. Income taxes and the mortgage deduction, along with direct federal subsidies of mortgages, increase demand for homes. Even with the enormous increase in the quality of home construction since WWI (even since WWII), houses would be a hell of a lot cheaper than they are now without those.
Add that to the general cost to the economy as a whole from taxes and regulations, and it’s no surprise it’s a tighter squeeze.