Why the U.S. housing market resists improvement

Columnists like Robert Samuelson of the Washington Post seemingly offer solutions, "No easy housing fix," to the problems of today's housing market, which traditionally has driven about 20% of the national economy, but the real problem is that the costs of sprawl are no longer so hidden.

From the article:

We Americans think of ourselves as problem-solvers, but the housing collapse has so far eluded all solutions. Perhaps 10 million homes have gone into foreclosure since 2006; millions more will follow. From their peaks during the real-estate bubble, home prices are down 30 percent, new housing construction has dropped 75 percent and existing home sales are off almost 30 percent. Housing’s collapse is one reason the economic recovery is so weak. Construction remains depressed, as are the appliance and furniture sales spurred by home buying.

It may be that patience is the only cure. Home prices have to find bottom; only then will more buyers return. ... Housing’s collapse is usually laid to too much unsold supply, which depresses prices and construction. ... Unfortunately, the real problem is too little demand.

As energy costs increase, concentration, rather than deconcentration, is the natural response, to reduce costs--especially as incomes for most people are stagnant, even with two wage earners per household.

So housing markets based on sprawl resist being "fixed" because the problems aren't purchasing power--after all, the price to purchase is low (even if there is some slowdown in purchasing over beliefs-fears that prices will continue to drop--but location.

Andrew Ross, a professor at New York University, has just finished a book on Phoenix as the poster child of growth and the impact and implications as a result of material change in U.S. development conditions.

The essay in Places Journal, "Bird on Fire: Lessons from the World's Least Sustainable City," which discusses "the fall of the housing market" more broadly, as a sign (indicator) that the paradigm of "growth liberalism" [Robert Collins, "Growth Liberalism in the Sixties: Great Societies at Home and Grand Designs Abroad"] is no longer viable, is drawn from the second chapter of his book. (Also see "The Ponzi State; Florida's foreclosure disaster.")

Samuelson ends his column with this paragraph:

Americans assume that all problems have “fixes.” But some don’t. History suggests that it will be hard to overcome the housing bust’s powerful undertow. Pent-up demand and attractive prices may be the only cure. Economist Khater has studied regional housing collapses and finds that it takes seven to nine years before prices regain previous peaks. If anything, he says, today’s bust looks much worse.

But it's more likely that the "market problems" are far deeper than even he realizes, although the Washington region, which is relatively strong, may be able to support sprawl for a longer period of time, even though there are some efforts within the suburbs--redevelopment towards a more urban paradigm in White Flint-Rockville in Montgomery County, Maryland, and Tysons Corner in Fairfax County, Virginia, and the development of the "Mosaic District" from scratch, but with Bethesda Row as the model, in Merrifield, also in Fairfax County--to redevelop in line with the new development reality.