Back on the Housing Bubble Rollercoaster

PHOENIX, ARIZONA:
Back on the Housing Bubble Rollercoaster

Hugh Pavletich FDIA
Cantabrians Unite
Performance Urban Planning
Christchurch
New Zealand

Phoenix, Arizona (like Las Vegas, Nevada) is a strangled housing market, because much of the land is under Federal Government control and is not responsive enough with land supply. So, instead of being able to quickly provide new housing – a bubble is triggered - unnecessarily.

This could not happen in Texas, for example, which has open land and sound infrastructure financing policies, allowing adequately responsive land and housing supply to meet demand.

Azcentral.com explains within “Big profits for home-flippers signal Phoenix-area rebound: how this new housing bubble has just erupted again in Phoenix, Arizona.

Within a recent New York Times article by Floyd Morris “Texas Lending Law Shielded Many Homeowners From Housing Bust - NYTimes.com”, the significance of that States Mortgage Consumer Protection legislation is discussed. In theory there are limits to the Loan to Value Ratios.

There is debate about the significance of this legislation or whether the memory of the S&L crisis is seared in to Texas political and commercial culture (as the Weimar Republic inflation is seared in to the memory of Germans) is a more significant influence on responsible mortgage lending. Not surprisingly, it is the Banking sector (not known for its sense of social responsibility) pressing for the relaxation of the Texas Mortgage Consumer protection legislation though!

Be that as it may - a multimedia hyperlink “Hints of a Bottom in Home Prices - Graphic - NYTimes.com” is provided, illustrating how much prices fell within various housing markets throughout the United States, after their artificial land scarcity “triggered” housing bubbles collapsed from their peaks.

Phoenix at the peak of the bubble hit a median house price of $287,000 collapsing to $119,000 – a 55% fall.

In contrast – the normal open and affordable market of Dallas Fort Worth median house prices remained unchanged at $149,000. Rather amusingly, as the bubbles were collapsing elsewhere, the soundly governed housing market of Houston median house prices moved from $149,000 to $156,000 – a 5% increase over a 5 year period through mid 2006 through late 2011.

During mid 2010 within the article “Americans Slow Learners About Housing Bubbles | Scoop News”, the writer drew to readers attention an important speech at the time, to the US Annual Real Estate Editors Conference in Austin, Texas, by Mike Inselmann, co founder and President of the US housing industry research firm Metrostudy
Mr Inselmann made it clear within his speech that the “witch brew” of the housing bubbles was a local growing economy restricted by regulation and lack of land supply to meet demand – not the sub prime (lax) lending.

“ The housing bubble ‘didn’t start with sub prime – they were the guys who added gasoline to the fire. They (others – being regulators)) created a mismatch which started the inflation in housing, that was turbocharged by sub prime financing’ he said”.

“ ‘The housing market was hitting a wall in affordability, and sub prime lending offered the means to continue the price escalation’ he noted”.

“ ‘When the next housing cycle hits, the danger is that we are going to go through exactly the same phenomenon we went through this time’ Inselmann said”.

Mr Inselmann’s words unfortunately have proven prophetic – with respect to the United States housing bubble markets. Nothing has been learnt.

Local artificial land scarcity is the housing bubble “trigger” – finance in all its forms (whether equity, bubble equity, mortgage debt) is simply the “fuel”.

Rather remarkably – it seems the artificially land strangled housing bubble markets of the United States – such as Phoenix, Arizona – are blindingly repeating the mistakes of history. It’s not that far to travel from Arizona to Texas to learn how normal affordable housing markets are governed responsibly.

Indeed – the normal housing markets of Texas appear to be better understood in New Zealand and Australia than Arizona, due to the annual release (8th Edition this January) of the “Demographia International Housing Affordability Survey” !

ENDS

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