Don’t believe everything you read in the Wall Street Journal — at least if it’s about housing. On the editorial page and even in its news coverage, over the past year or so this venerable newspaper has launched a steady barrage of attacks against the industry: Housing is the next big financial bubble that will burst. Fannie Mae and Freddie Mac are the nation’s next Enron. Housing is setting the nation up for a major economic tumble.
Don’t Believe Everything You Read in the Papers
These inflammatory stories are being published by the most respected, most widely read financial newspaper in the country. But that doesn’t make them true. Underlying the Journal’s coverage is the assumption that housing values are speculative and prices are headed for a big fall. That assumption ignores a mountain of evidence that the fundamentals for housing are strong and likely to remain strong for years to come:
- Today’s housing market is not overbuilt. As Federal Reserve Board Chairman Alan Greenspan sees it, “There is little indication of a supply overhang in newly constructed homes. The level of overall new home construction…appears to be well supported by steady household formations.”
- Demand for housing is climbing in tandem with population growth. The U.S. population is expected to expand by at least 30 million during this decade, producing, on average, more than one million new households per year. Factoring in the number of units that are lost from the housing stock, as well as second homes and other vacancies, more than 1.8 million new housing units (including manufactured homes) will be needed on average each year to meet the demand. That is about the level of today’s pace of housing production.