Wall Street is saving the housing market and the economy!! Reminds me of the arsonist who sets the fire then puts it out. I GUESS we are thankful. Read here why...

NYTIMES

If you are interested in "going deep" with your knowledge of various underlying fundamentals contributing to our economic recovery, here is an article that explains the role BIG Wall Street investment firms are playing in housing markets that were the MOST adversely affected during the Great Recession.

"...The last time the housing market was this hot in Phoenix and Las Vegas, the buyers pushing up prices were mostly small time. Nowadays, they are big time — Wall Street big.

Large investment firms have spent billions of dollars over the last year buying homes in some of the nation’s most depressed markets. The influx has been so great, and the resulting price gains so big, that ordinary buyers are feeling squeezed out. Some are already wondering if prices will slump anew if the big money stops flowing....

Blackstone, which helped define a period of Wall Street hyperwealth, has bought some 26,000 homes in nine states. Colony Capital, a Los Angeles-based investment firm, is spending $250 million each month and already owns 10,000 properties. With little fanfare, these and other financial companies have become significant landlords on Main Street. Most of the firms are renting out the homes, with the possibility of unloading them at a profit when prices rise far enough.

This is a good thing, for the most part. But it is difficult to not be a little cynical, at least for me.

Interesting twist. The institutions (not necessarily the SAME ones) responsible for the run up in housing prices and subsequent bust are now aiding in the recovery of the housing market in the hardest hit areas.

Reminds me of the arsonist who sets a fire then comes in and saves the day by putting it out and rescues people.   They might consider themselves a hero but  they are still an arsonist at heart.

Look around your house. Do you have more living space then your really need? Do you have room(s) that are glorified storage spaces? Now you see the problem with our national housing policy.

Yes, I do too...
Before I became a teacher, I had a furniture upholstery business (Dallas/Ft Worth Area).  I was amazed at the number of houses I would visit where residents would have rooms they did not use at all. It always perplexed me...until I could afford to move into a upper-middle class neighborhood.  Now I understand....

Source: Carpe Diem

The period 1986-87 seems to be the birth year for the slope of the square footage to become very steep only to be interrupted by recessions/slowdowns (line flattens out 1990-95, 2001-2003, 2007--?).  I don't think there is one particular reason for this, seems like a combination of housing policies (mortage interest deduction, low-to-no down payments, interest only loans, etc) PLUS Americans attitude towards homeowership (a "right") and "conspicuous consumption". All contribute to an over-allocation of societal resources towards this one sector of the economy, which makes the whole economy vulnerable to housing slowdowns. 

 I look around my own house and see wasted room and space (what is the purpose of vaulted ceilings?). This "extra" space is full of natural resources that are unproductive (wood, metal, etc) and it takes energy to cool or heat it---GAH!  Look around your residence---do you notice the same thing? 

The chart below shows the rather stark difference in living space between the US and Europe (this chart included houses as well as apartments, whereas the one above is just houses). Even US residents classified as poor apparently require 33% more living space than the average European.  Why do we need so much personal space?

Source: Carpe Diem

I am not advocating pro-active government policy to discourage the building of larger, wasteful homes--better known as "social engineering" by my conservative friends.  I would advocate government doing less--by that I mean discontinuing subsidies/policies that encourage over-building and over-spending on homes.  If you want a bigger house, don't ask me or any other taxpayer to subsidize it.

If you are going to take a conservative/libertarian stance, my friends, then you must be willing to pay for it yourself. Don't say yes unless you REALLY mean it.  Otherwise, we should not bag on someone else's subsidy/deduction...That is only "fair", right?

If you are a liberal/environmentalist-type, you don't escape criticism either.  Why do you have some much extra space soaking up societal resources?  The little bit of recycling you do to feel good is more than off-set by the extra housing you consume relative to what is sufficient for "sustainability".  Kinda  forgot about that, didn't ya?

There! I bagged on both sides of the spectrum. Guess that makes me the morally superior one, doesn't it?

Glad I am so perfect! :)