This week the New York Times published an article about how the national housing market “finally looks healthy” that was at best misleading and at worst irresponsible (it was also lazily edited). The writer bases his argument on a joint release from the US Census and HUD that shows an increase in housing sales of 12% over last month and 31% over the same month last year. On the surface, this could be a positive sign that the housing market is returning to ‘health’, but once you dig into the numbers, the picture is more complicated. In fact, if this writer stepped back and examined the broader context of the economy, it would be hard to argue that we have a healthy market at all. This reveals a larger problem about how the media talks about the housing market and what it hasn’t learned from the 2008 crash.
Let’s start with the data from the joint report. Though the article does point out that this data has a wide margin of error and is volatile, it still proceeds to use it as the core of the argument. The problem is, this data does have a wide margin of error and is incredibly volatile because it’s based on a quick sample turnaround. You only need to look at the previous month’s release (June 2016) to see the difference in the July report’s revised totals. They lowered the June numbers by 10,000 homes. The report itself is clear about expectations and explains its methods and possible errors. It also makes it clear that it takes a quarter to get an accurate sense of the trends within the market. You can quibble with how different the data ends up being from what is currently reported, but the point is, this is a thin piece of evidence to base an entire argument on.
Now, let’s just assume that the data is more or less accurate. We are still left with a more complicated picture than the article suggests, particularly when trying to compare the differences among regions. Though the numbers are broken down into 4 regions, the raw numbers don’t show how wildly different the housing market is, even in certain parts of the same region. For example, prices and availability for housing in and near NYC remain a competitive death-match while parts of Connecticut less than an hour from New York are struggling. Does that mean the housing market is healthy?
The reality is that economic growth is happening in an increasingly smaller number of cities (and it’s almost exclusively cities) in certain pockets of the country that also have extremely expensive housing markets. This is because of a limit in the supply of housing in these markets relative to the demand, whether as a result of geographical or political limitations. In either case, this situation is making it harder for middle class workers, let alone poorer workers, to be able to locate in these hot job markets. Hot job markets should create a housing boom, but that’s not what’s happening and it’s hurting our productivity as a nation. That’s not the sign of a healthy housing market.
This article also somehow neglects to mention (which is surprising given that the Times has covered this issue in another section recently) who is buying up a lot of these houses in certain market segments. The entry of private equity firms into the housing market has been a quiet, powerful force building over the last 10 years. Though the number of houses under control by private equity on a national level is relatively minor, the concentration of their portfolios in certain markets has had a huge impact on the perception of the housing market as a whole. In many cases, they are buying up homes for straight cash. They then rent them until the market reaches a certain point to flip them. This speculation is perfectly legal, but it distorts the actual activity of house sales.
Also unaccountably left unsaid is the question over the financial health of the housing market. No, another crash is not just around the corner, but the continuing receivership of Freddie Mac and Fannie Mae (who collectively back over 60% of US mortgages) has left the previous crash in an unresolved, frozen state. Though many of the excesses that led to the crisis have been removed, the flawed assumptions underlying the housing market – that homeownership is a good political policy, that the government should support it as an economic policy - remain in place. The fact that this policy costs taxpayers $150 billion a year while still failing to provide adequate housing for millions of Americans should challenge the assertion that this is a healthy market. It’s not even a true market.
It is a mystery how the same paper that has addressed all of these issues at various times could allow an article to be published that breezes passed them all. Maybe it’s just laziness or someone having an off-day, but it could also be someone pushing a narrative in search of story. The media primarily talks about the housing market as an economic trend. In doing so, it internalizes the assumptions of people who profit from the housing market regardless of how that process impacts the larger society and economy. The housing market looked healthy, even robust, in the lead up to the 2008 crash, but underneath the sales numbers were real problems with earnings, financial instruments, and exploitation that went underreported until it was too late. It is stunning and ultimately disappointing to see the Times revert back to this laziness and water-carrying.
It’s easy to cherry pick data from a report or to draw phantom conclusions from it, but it’s more important to report the full context of an issue to readers. The housing market is not healthy. Arguably it has never been healthy. Trying to present it that way does a terrible disservice to the people that are suffering from it and to the people that are trying to solve it.