Economics and similar, for the sleep-deprived
A subtle change has been made to the comments links, so they no longer pop up. Does this in any way help with the problem about comments not appearing on permalinked posts, readers?
Update: seemingly not
Update: Oh yeah!
Thursday, September 09, 2010
I suspect that there are as yet undiscovered Amazonian tribes who also make the mistake of believing that houses are a consumption good. Via Yglesias, we have some bod in the New York Times:
I can’t claim to clear up all the uncertainty. But I do want to suggest a framework for figuring out whether you lean bearish or less bearish: do you believe that housing is a luxury good and that societies spend more on it as they get richer? Or do you think it’s more like food, clothing and other staples that account for an ever smaller share of consumer spending over time?
sigh. Nothing particularly objectionable about this as long as you're clear in your mind about the meaning of "housing", and indeed the accompanying chart correctly plots the CPI component reflecting rent and imputed rent. But David Leonhardt's article jumps immediately from there to talking about house prices.
The value of a house is the capitalised value of the stream of housing consumption provided by it over its lifetime. So it depends not just on the price of housing or its expected future path, but the capitalisation rate used. You can't ignore the level of interest rates in thinking about these things.
I think that the root of the problem here is that the following sentence refuses to stay put in its proper home on the personal finance page, and keeps trying to run away and join the circus in the economics page.
The best advice for homeowners and would-be buyers may be to think of a house not as an investment, first and foremost, but as a place to live.
I would guess that some restaurant critic has written "think of the Doodleburger not as food, first and foremost, but as a thing to eat", but he probably knew he was joking. This one about housing is just as incoherent.
The only people who are actually purely looking for "a place to live" and purchasing housing on the spot market are tramps searching for doss-houses. Everyone else is looking for a place in which they are going to live for a period of time. During that period of time, they will consume housing and pay money, and at the end of it (if they bought) they will receive the difference between the buying and selling price. It's an investment. In the personal finance pages, this just means "don't enter into housing transactions where price appreciation is vital to the affordability calculation", which is reasonably good advice, but anyone reading the economics section ought to be enough of a grown up to realise that a house is an investment.
Bonus hilarity - the bit where they try to find out what happens to the housing component of consumption for long runs of time and hooray! some Freakonomics type has found some houses! in Boston! that have been recorded since "the late 19th century and are still around"! American exceptionalism, how are ya.
this item posted by the management 9/09/2010 02:40:00 AM