Politics & Policy

Hate to Burst Your (Housing) Bubble

But there isn't one.

 

A few weeks ago, BuzzCharts came across this headline: “80% Believe Housing Bubble.” Now, we don’t claim to know everything about the housing market, but we do know this: If 80 percent of people believe that an asset is grossly overvalued, it’s not. By definition, there’s no way the crowd can believe the crowd is wrong and be right in believing it.

 

For a couple of years now the received wisdom has been that the Federal Reserve will have to raise interest rates, and that those hikes will “burst the bubble” in the housing market. But recent data have supported what Larry Kudlow, Brian Wesbury, Steve Forbes, and BuzzCharts have been saying all along: A housing slowdown will take place, and it will be orderly. No bubbles. No pops.

 

The received wisdom is always a target-rich environment if you’re hunting for economic fallacies. But here’s the economic truth: The Fed doesn’t set mortgage rates. When it “raises rates,” that just means it is removing money from the economic pipeline. Not only doesn’t this procedure increase mortgage rates, but over the long run it reduces inflation and permits the markets to lower mortgage rates.

 

Yes, the housing market has cooled in 2006. But think of this: The Fed has hiked its overnight interest rate 17 times in a row and we’re still selling almost 7 million houses per year. Meanwhile, median home prices are almost exactly where they were one year ago. All this is because the economic fundamentals that have been driving housing are still driving it.

 

This year, America will pass the 300 million population mark. That’s 9 million higher than the last census. Income tax receipts are up 13 percent year over year, according to the latest Treasury report. Mortgage rates are still low.

 

More people with more money and relatively cheap mortgages is translating to an orderly slowdown in a cyclical market. Remember, if it didn’t burst, it wasn’t a bubble.

 

– Jerry Bowyer is the author of The Bush Boom and an economic advisor to Independence Portfolio Partners. He can be reached through www.BowyerMedia.com.

Most Popular

Books

Three Cheers for the Quiet Ones

People often dismiss shy, quiet characters in literature. Readers prefer to identify with Jo March, Elizabeth Bennett, or Anne Shirley -- those delightful, bold, and charming characters who made a deep impression on us when we first encountered them. While there’s nothing wrong with emulating or admiring these ... Read More
Books

Three Cheers for the Quiet Ones

People often dismiss shy, quiet characters in literature. Readers prefer to identify with Jo March, Elizabeth Bennett, or Anne Shirley -- those delightful, bold, and charming characters who made a deep impression on us when we first encountered them. While there’s nothing wrong with emulating or admiring these ... Read More
Culture

New England Journal of Medicine Pushes Reparations

Reparations would grant African Americans government benefits not paid to other Americans to rectify the awful sin of slavery and the "peculiar institution's" residual harm. It is a favored policy of hard progressives, so of course, the New England Journal of Medicine -- which regularly promotes left-wing causes ... Read More
Culture

New England Journal of Medicine Pushes Reparations

Reparations would grant African Americans government benefits not paid to other Americans to rectify the awful sin of slavery and the "peculiar institution's" residual harm. It is a favored policy of hard progressives, so of course, the New England Journal of Medicine -- which regularly promotes left-wing causes ... Read More
Media

Wajahat Ali, Ctd.

I gather he didn’t like my comment on his New York Times op-ed on the folly of reaching out to Trump supporters. He snipes, “I await The National Review’s piece on reaching out to Biden voters and reading about their ‘elegy’ and understanding their ‘economic anxiety.’” After the 2016 election, ... Read More
Media

Wajahat Ali, Ctd.

I gather he didn’t like my comment on his New York Times op-ed on the folly of reaching out to Trump supporters. He snipes, “I await The National Review’s piece on reaching out to Biden voters and reading about their ‘elegy’ and understanding their ‘economic anxiety.’” After the 2016 election, ... Read More

The Imaginary Trump

Like Andrew Jackson, Donald Trump is man who represents the age in which he lived. Whatever you may think of the age. Jackson embodied a generation of men who had risen and made their mark in a young country. He represented their desire for greater representation, even if it had costs for slaves and Indians. He ... Read More

The Imaginary Trump

Like Andrew Jackson, Donald Trump is man who represents the age in which he lived. Whatever you may think of the age. Jackson embodied a generation of men who had risen and made their mark in a young country. He represented their desire for greater representation, even if it had costs for slaves and Indians. He ... Read More
Economy & Business

Shopping Superstitions

It’s the boss-bossiest time of the year, when Americans getting ready to open up their wallets to buy Christmas presents are lectured by illiterate halfwits about where and how to spend their money. The usual demands: Buy local, or buy from small businesses. This is pure nonsense, and you should feel free to ... Read More
Economy & Business

Shopping Superstitions

It’s the boss-bossiest time of the year, when Americans getting ready to open up their wallets to buy Christmas presents are lectured by illiterate halfwits about where and how to spend their money. The usual demands: Buy local, or buy from small businesses. This is pure nonsense, and you should feel free to ... Read More