Monday, January 26, 2009

Housing Bubbles Around the World

The blame for the American housing bubble has been a battle between the Left and the Right. The Left wants to vaguely blame deregulation and a yet still undefined "Greed". The Right over plays its hand by including minor distortions caused by the Community Reinvestment Act, Fannie Mae/Freddie Mac, and Barney Frank. Both sides, with some cause, have blamed the Federal Reserve and it's easy credit policies. As I have said before, they ignore land use planning, to their peril.

Wendell Cox and Hugh Pavletich, released their 5th annual Demographia International Housing Affordability Survey: 2009. (HT: ObjectifLiberte).

Lots of pretty charts and graphs, not a standard and dull academic paper, so at least skim it.

What hurts the case for much of the Right and destroys the claims on the Left, is the international nature of the boom and bust. How exactly did regulation in the United States cause housing booms and busts in the U.K., Ireland, Canada, Australia, and New Zealand? How did regulation cause a massive boom on the West Coast, Florida, and the Northeast, but not in Texas, Georgia, and North Carolina when the latter states have more population growth?

For regular readers, none of this will come as a surprise because I've already linked to half the articles and studies mentioned in the paper.


In related news:

Last year I attended the 6th Annual Preserving the American Dream Conference in Houston. This year, the conference is being held in Seattle. I thought it was fantastic last year. I was able to speak to aforementioned Wendell Cox for a few minutes, which was a treat. Also note that Vincent Benard, who writes Objectif Liberte and occasionally leaves comments on my site, will be making the trek from France to present at that conference as well.


Vincent said...

Hi Bryan, thank you for the quote.

BTW, I won't say Fannie and Freddie were "minor distorsion" to the US credit market. They were huge ones.

The state-granted advantages they were enjoying totally distorted the credit market towards an inefficient and risky model.

Of course, land use regulations are mostly responsible for the bubble's formation. But Fannie Mae and Freddie Mac, by the way they were operating, brought the fuel to the fireplace, and their state-backing broke the supply-and-demand mechanisms that would have otherwise prevented the bubble from becoming so huge.

In France, we have a bubble, obviously, but our default rate on credits remains low (for the moment. The economic downturn will hurt us all the same) because we haven't things like Fannie and Freddie.

Brian Shelley said...


In deference to your expertise I'll go read some more on the subject. Many people talked about it, but I never really understood why they thought it was a big deal.