Thoughts on Housing

I've previously blogged about the connection I saw between immigration and the housing bubble.

One early morning on the road I got to thinking, always dangerous for a bureaucrat. What are the forces in the housing market?

Suppose some mythical day in the past the US had 150 million households and 150 million housing units, that is, everyone is housed and every house is used. What happens next?

1. Disasters--houses get destroyed by fire, flood, etc. Need replacements.
2. Natural increase--people have babies who grow up and want their own household. Need new housing.
3. Immigration--people come to the US and want housing.
4. Movement--people move to where the jobs are, abandoning housing units in the rural areas, the Plains, etc. Need housing in Vegas.
5. Wealth--John McCain gets rich and decides the family needs another house. And another. And another. And another. And another. [Is the solution for our problems for everyone to follow his example?]
6. Smaller households--people get enough money to establish separate households. Want housing.
7. Part-time households--this may be a misnomer, economists may have a term for it and may even have statistics for it. It's the condo near the college for the helicopter parents to live in while visiting baby. I guess if we treat "wealth" as a factor, this would be included there.
   
8. Moving up--people look at their wallets, at the cost of housing, and the Joneses and want a better house.
9. Sharks--people find they can make money by persuading people to buy and sell--whether it's the mortgage brokers, the financiers, etc.
   

Given these sources of demand, builders build, people buy, and pretty soon you get a bubble going as everyone hears there's easy money to be made, not on Wall Street, not on Main Street, but on Housing. The buying and selling adds a final element: even though houses change hands quickly, the number of sales still (I think) lowers the occupancy rate a tad, so a few more housing units are need.

This list puts my immigration claim into perspective--it's a factor, but not a main factor. Good old-fashioned greed, the desire for more, is the main factor.