This sounds like bullshit to me, but perhaps I’m biased. Asides from myself, my entire family is what one might call “working poor” and just this week three people have called asking for help because they’re struggling. Two of them got promotions during the pandemic and one of them works as a train mechanic by day for Amtrak and had to pick up a second job in the evenings 3 nights a week to stay afloat. None of them have recreational drug habits, gambling addictions, or a penchant for spending money they don’t have aka crippling credit card debt. Sadly, not one of them can afford to purchase a modest home because every bit of their down payment savings dried up during the pandemic. My three person sample size is statistically irrelevant but I do have 43 cousins on my mom’s side alone nearly all of which have expressed similar misgivings in the family group chat.

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As the article points out the largest change in nonfinancial assets appears to be "Vehicles", which increased by 30% from 2019 to 2022. After that is 'Primary Residence" with an increase of 18%.

Keep in mind that's a terrible spike in prices driven by supply chain related shortages in chips required for the manufacture of new cars. In other words, it's completely illusory because realizing those "gains" would require selling the vehicle and switching to the bus. What's more while middle class households may have seen appreciation in the value of any stocks that they hold. Does that really make sense for poor/lower middle class families? I am going to guess that the bulk of the "increase" they are seeing is the inflation driven increase in used car prices.

Plus, keep in mind that housing inflation puts owners in exactly the same boat as the increase in used car prices: if you want to realize your "gains" that requires selling and that in turn requires most people to buy a replacement home (with the counterpart to taking the bus being homelessness).

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> If you manage nationwide housing prices and supply over time like Singapore does, then it can be OK, but that’s very tough to do.

Worth noting in Singapore the rent's gone up enormously (40-80%) for many over the past couple years or so too. Marginal supply-demand imbalance and influx of new money can have disproportionate impacts that reverberate through the system.

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Oct 27, 2023Liked by Noah Smith

Very interesting analysis.

Housing is a weird one, isn't it. Average house prices in the UK, having reached a ratio to average income in excess of 10 (though not on the same basis as the ratio in Noah's article, I don't think) have been 'undergoing a readjustment' that is expected to last until at least 2025 - absolutely no one is calling it a 'crash' as that would be sacrilege.

I read somewhere that in 1985, at the peak of the Japanese economic boom, the grounds of the Royal Palace in Tokyo were valued at more than all the real estate in California! At that time the average house price in Tokyo was $500k. It is now about $100k.

Is this true and should we in the UK be worried?


Concerned of Kent

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Oct 27, 2023·edited Oct 27, 2023

"But I’m not so worried this time around. First of all, young people who do buy in today stand to gain a lot — their wealth will soar if and when interest rates fall, and they’ll also be able to refinance their mortgages."

I wish I was not as worried about this as you are. I am worried that many young people are getting stuck with lemons. Are new houses getting bigger and nicer? Probably. Are these houses being built anywhere near job centers and are young people buying them? Absolutely not. Young people are mostly trying to buy houses near job centers where the housing market usually does behave more like a cartel. In addition, many of these older homes near the city can have 5-6 figure amounts of deferred maintenance that probably goes unrecognized by green home buyers (Canceling out all the equity you made when interest rates drop). There is also the fact that many of these older homes are not heated properly and will need to be retrofitted if the US is ever able to make the transition to a carbon neutral economy.

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What kind of happy talk are you babbling? 12% of the populace can't feed themselves, 38% can't pay their weekly bills and 60% don't have $400 for an emergency. How much do they pay you to be the cheerleader for the managerial class?

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Also: all that newfound wealth somehow doesn't seem to be impacting car loan delinquicies:


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Sorry, Noah, you sound desperate in this article. Housing prices have shot up temporarily until they find a new equilibrium, and these gains won't put any food on the table.

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There are reasons why some people simply will not believe good news of any sort.

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Oh thank god. I thought the $2000 I pay for part time child care, racking up credit card debt, the rattling sound in my car that I can’t afford to check out, the third medical bill I need to put a payment plan on, and the return of student loans was causing all the stress and insecurity in my life. Glad to see data to show that it’s all good!

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I view this article as pretty much exactly why I think economists need to learn humility and why the field in general just sucks.

Do economists serve the public and help bring about the public's idea of a good economy or does the public have to conform to what economists think is a good economy?

To put it another way, if there is a "market for economies" and you have an economy that you think is really good, but the "economy market" rates it poorly, is it actually a good economy? If everyone else is willing to trade what you perceive as being valuable for something else you view as having lesser value, then how can you say you are correct in your valuation while they are wrong?

People can be irrational, but is it the place of economists to simply yell at them to be rational, or to conform to that irrationality and produce things people actually like?

The fact that people don't like the economy is information that you need to incorporate into your understanding of what makes a good economy. Clearly if people still think the economy is bad, and are willing to trade for another one, then economy valuation just doesn't work the way you personally happen to think it does.

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I like your stuff! I think there's a few massive holes in this piece though...

What about the feds not actually reporting inflation correctly? Topping out at 7-8% over COVID was them hedging imo, it gets much much worse when you look at individual markets.

What about the US printing trillions of dollars out of thin air? This erodes the value of the dollar.

What about US consumer credit card debt topping $1 trillions, it's highest ever? As reported by Reuters in August.

Hedged inflation, devalued dollar, rampant consumer debt...

People may have more dollars right now, but those dollars are worth FAR LESS than they ever have been worth, consumers are leveraging debt more than ever, and the feds aren't giving us the whole picture. 🤔

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Oct 29, 2023·edited Oct 29, 2023

Zhou Enlai is reported to have replied “It’s too soon to tell” when asked what he thought was the significance of the French Revolution. Yes Americans grew wealthier, but that is because the federal government ran up its debt from $23 trillion in 2020 to $32 trillion. Any banana republic can run up the wealth of its people by running up public debt. Perhaps it is also too soon for us to take a victory lap over the pandemic wealth creation while the bill is only starting to come due. By the Fed’s own admission, the higher interest rates are yet to take a bite. Our budget deficit is 8% of gdp: an unprecedented level in peacetime, and our interest costs are already approaching $1 trillion per year. It does not make sense to celebrate our “increased wealth” while ignoring the simultaneous increase in future tax liabilities.

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I would like an analysis on this survey cross-checked with several other indicators. It seems cheery, I believe things are positive, but not as good as the picture painted here.

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Wow. People REALLY do not like good news. The comment stream is as bad as Tyler Cowen's :)

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