It is ridiculous for USA TODAY to suggest that, for the past several years, home prices have surged “in part because developers, real estate brokers and mortgage lenders have spread the myth that (home prices) have nowhere to go but up.” As any college freshman taking Economics 101 this fall would tell you, prices will rise when demand is strong and supply is tight (Dot-com bust echoes in nation’s housing boom, Our view, Real estate prices debate, Aug. 25).
Allow me to burst your bubble. We enjoy a free market economy in the USA, and the housing marketplace is highly efficient from a pricing perspective precisely because laws of supply and demand rule the day. The United States is in the midst of a 13-year housing boom with home prices rising each year because the fundamentals that support the business are strong, not because a group of industry insiders got together to dupe the home-buying public.
As a matter of fact, average home prices in the USA have risen every single year since 1950, even through eight recognized recessions. From 1978 to 1981, mortgage interest rates soared from 9% to more than 18%, and although the volume of homes sold during those years went down, home prices still continued to rise. The reality is that when the housing market cools, people don’t sell off their homes in a panic and move into a tent. They just don’t move.
It is irresponsible journalism to compare today’s housing boom with the dot-com bubble. Real estate ownership is a long-term investment secured by a fixed, tangible asset and not a new-economy fabrication being touted by stockbrokers, analysts and investment bankers.
Stick to reporting the news and stop trying to scare the U.S. public, nearly 70% of whom just happen to be homeowners.
