Seven years after the last housing debacle devastated the world economy, we may be on the verge of another, albeit different, bubble.
If the last real estate collapse was created due to insanely easy lending policies aimed at the middle and working classes, the current one has its roots largely in a regime of cheap money married to policies of planners who believe that they can shape the urban future from above.
This time, the potential property blowout has roots in large part outside the United States.
Many of China’s current problems, in fact, can be traced in part to its unhealthy inflation of real estate values spurred by a drive to increase urbanization and density.
In Boston, demand for space in expensive residential buildings—where a 500-square-foot studio in the Fenway Park area starts at $2,700 a month, and new two-bedrooms stretch into the $7,000s—may be headed toward a glut.
Sound familiar?
Even some ascendant markets like Nashville, where apartment construction is growing more than 3 percent annually, appear to be on the way to being overbuilt.
If there’s a downturn in tech, which seems likely in the next year or so, expect San Jose, Raleigh, and Austin to start seeing a decline in rents and greater competition for tenants.
As we can see in China, Australia, Canada, and now at home, planners’ hubris about what is best seems to lead inevitably to a new real estate bust.
What we don’t need is not so much more pack and stack housing, luxury units, and absentee owners but a return to an updated version of Levittown or Lakewood.
This would help middle class families and would supercharge the economy, producing three times as many jobs as multifamily construction.
It’s about time for the political class to acknowledge that, in most cases, people know what they want better than those who claim to know best.
That’s as true in Beijing or Shanghai as it is in Sydney, Toronto, or Los Angeles.
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