Here's a guest editorial from today's Seattle Times that says something I've been saying all along: The "home prices are high because we're running out of land because of Growth Management" argument doesn't hold water.
The cost of housing is spiraling out of control in many parts of the Puget Sound region. King County is redefining sticker shock for homebuyers as the median price of housing approaches $440,000. Years of double-digit increases are a serious threat to many people's dreams of home ownership, and to our region's livability."Market demand... is the primary determinant of housing prices." You don't say. Like maybe, market demand created by loose lending and low interest rates? The article mentions "increased income and purchasing power," but then goes on to over-emphasizes "our relatively high local wages" (without providing any actual comparative data), and essentially ignores the fact that the "increased purchasing power" comes from loose lending and rock-bottom interest rates.
As the problem escalates, the search for real solutions has become increasingly high-stakes. To tackle this challenge effectively, we must work together with accurate information. We must also move beyond misleading and misdirected attacks on environmental and growth-management laws. The evidence suggests these attacks are misleading and unwarranted.
Opening rural areas to sprawl development doesn't increase housing affordability, nor does protecting rural areas from irresponsible development make housing unaffordable. The state's Growth Management Act actually requires local governments to take steps to improve housing afford-ability and choice.
The Brookings Institution has found that market demand, not land constraints, is the primary determinant of housing prices. Its study, "The Link Between Growth Management and Housing Affordability: The Academic Evidence," reported that "housing prices are actually determined by a host of interacting factors, such as the price of land, the supply and types of housing, the demand for housing, and the amount of residential choice and mobility in the area." In other words, the impact of growth management on housing prices is only a part of the equation, and a relatively small one here.
In our popular area, demand is the big driver of housing cost; people want to move here and stay here. Increased income and purchasing power also are major factors in the rising cost of housing in our region.
In the end, our message is simple. We must do more to tackle the housing affordability problem in our region. But, we cannot succeed unless we focus on the facts about what is really driving our housing costs.I agree completely. Which is why I am so disappointed that in the entire 56-page study, the hand that lending standards and interest rates have had in creating the excessive demand of recent years is essentially completely ignored. Go ahead, search the pdf for "interest rate" or "financing" or "lending." Nada. They also chose to ignore the mass psychology that comes into play when appreciation of an asset is believed to be a "sure thing." In my opinion those are the two biggest reasons that the price of housing has shot up so much in the last few years.
I get the feeling that the purpose of the study wasn't to highlight the true reasons that housing is unaffordable, but rather to prove that growth management isn't the reason. I have said all along that "not enough land" is a bogus argument for skyrocketing prices, but this study does a disservice by ignoring the true driving factors in our recent price run-up.
(Aaron Ostrom & Carla Okigwe, Seattle Times, 01.05.2007)