My blogging colleague Toddi Gutner got a good discussion going last week when she asked whether or not “housing bubble” talk was just a lot of media hype. Hot Property seems to draw a lot of people who believe in the bubble thesis. So it seems only fair to give the other side as well.
One expert who doesn’t believe in the bubble, the pictured Raphael Bostic, happens to live in L.A., which is ground zero for a popping bubble in the view of bubble theorists. (In my BusinessWeek cover story I wrote that according to the National Association of Home Builders, only 2% of homes in L.A. are affordable by the median-income family in the area.)
Bostic is director of the Uuiversity of Southern California’s Casden Real Estate Economics Forecast and is a former senior economist with the Federal Reserve Board of Governors.
I've interviewed Bostic before and he makes some good points. Here's an excerpt from a USC press release:
"When buyers see home prices rising, they decide to jump in to the market while they can still afford housing. This is perhaps the ultimate buy and hold strategy – just the opposite of speculation,” explains Dr. Bostic.
Population growth, immigration, the strong economy of the 1990s, and the lowest mortgage interest rates since the 1960s have helped to increase demand for housing nationwide. But supply has not kept pace with demand in many regions because of high land costs, opposition to development, builders’ liability concerns and a time-intensive permitting process. Only when the supply-demand imbalance is restored will prices moderate, according to Dr. Bostic.
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.