Quote:
Originally Posted by Crawford
I think there are serious issues when housing prices massively outstrip income/wealth gains but I also think it's overall more good than bad. More people benefit than are harmed when property prices rise. I would rather buy in the Bay Area right now than in Cleveland, even though the pundits tell me the Bay Area is in "crisis" and Cleveland is a "steal".
|
This is just bad economics: never reason from a price change. You need to ask yourself
why prices are moving in the directions that they are. In Cleveland prices have collapsed because demand has collapsed; nobody wants to live there because living in Cleveland is a miserable experience. But that doesn't imply that rising prices are a good thing and that falling prices are bad. In California rising prices are evidence of a huge artificial shortage of housing that has failed to keep up with strong demand, while in Tokyo falling prices are evidence of good governance allowing housing supply to grow fast enough to accommodate growing demand. The first option is a boon to landlords and current homeowners who get to sit back and siphon off scarcity rent from everybody else, but it's a pretty terrible equilibrium for society as a whole as it's just rent seeking. The second option is a boon to everybody.
That being said, you're right to question the wisdom of people who say buying a home in Cleveland is a good investment while a home in the Bay Area is a terrible one.