Nicolas Retsinas, director of Harvard University’s Joint Center for Housing Studies, says in this interview with the Wall Street Journal that the housing market is cooling because lenders overlend, builders overbuild, and consumers now expect a drop in prices. We really don’t need a degree from Harvard to figure that one out, but he also finds a few noteworthy facts.
First of all, Retsinas finds a stickiness to home prices. It is interesting that home prices have been so resilient even in this down market. He points out that most of the homes for sale are by people who live in them and if they don’t get the price they want then they just stay. So, perhaps he’s suggesting that consumer expectations are misguided on falling prices.
Secondly, he finds that immigrants accounted for 40% of new households in the past 5 years and that the long term outlook for housing is good because of the expectation that this trend will continue. Demand for housing has long been viewed as a constant for most economists because people typically only own one home, but now the immigrant demand for housing provides a catalyst for stronger demand and a return of rising prices.
Geewiz, I never thought of that one before. Now there’s one more thing to consider when assessing our country’s immigration policy. God bless America.